Scraping the Bottom

Hong Kong prides itself on being a bastion of laissez-faire commerce. But one of the pillars of the local economy—the real estate market—has long been a rigged game. The government, which owns most of the land, regulates the supply of commercial building lots through land auctions and also produces subsidized housing for the masses.

Not surprisingly, policy planners have a spotty track record when it comes to matching supply with demand. In the 1990s, strict government controls fed a speculative price bubble that made Hong Kong one of the world's most expensive real estate markets. When the bubble...

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