Hong Kong's housing problem is getting worse with sky-high property prices leaving many people farther away from becoming homeowners while forcing others into crammed cubicles known as subdivided housing units that give a new definition to "living dangerously".

There are two reasons behind the much-loathed situation: One is internal factors such as short supply of affordable housing, the other is huge demand driven by free-flowing "hot money" thanks to the open market policy. The latter is particularly difficult for Hong Kong to address because there is little we can do about the quantitative easing (QE) fad sweeping through Western economies in recent years. The best and least Hong Kong can do right now is strike a balance between the two.

Prices rise and fall in response to changes of the supply and demand situation. Increasing supply is the easiest way to bring prices down but not so for Hong Kong because of the easy access to its property market for foreign capital. The amount of "hot money" flowing into Hong Kong reached $600 billion at one point as the US-led QE craze spread out. It is simply impossible for the government to block the inflow of foreign investment under the current circumstances, or ever, if the city is to remain a free market economy.

The government has taken a number of counter-measures against speculative investments in the property market this year to undercut the rising risk of an asset bubble burst. They may not be popular with some people but are absolutely necessary when you cannot change the existing currency policy for the same purpose.

The future housing development blueprint announced by the Singaporean government earlier this week has ignited the envy as well as imagination of many Hong Kong residents. While people argue about whether or not the SAR government should take a similar step one must keep in mind the two places are very different in many ways and should not be compared off-handedly. The bottom line is that whatever the solution one believes Hong Kong should borrow from Singapore has to be applicable under our unique conditions.

This is an excerpted translation of a Hong Kong Commercial Daily editorial published on Aug 22.

(HK Edition 08/24/2013 page1)