(Adds housing rentals in fifth paragraph.)
Oct. 19 (Bloomberg) -- Hong Kong’s elevated rental costs are “unfortunately the price we pay for success,” Chief Executive Donald Tsang said, amid surging home prices that have stoked social tensions.
When the “economy’s doing well, the rental inevitably would be high,” Tsang said in a program broadcast by Radio Television Hong Kong today. “Similar things happen in New York, London, or other similar successful cities. Provided people can have reasonable income to pay for the rent, and provided the business has generally sufficient profits to pay for the rental, we will continue to be very competitive.”
The city’s inflation accelerated to the fastest pace since the global financial crisis in 2008, on rising food and rental costs. Hong Kong is ranked as the world’s costliest office market by CB Richard Ellis Group Inc., while it is the most expensive place to buy a home, according to Savills Plc.
“High rental costs may drive foreign business investment away,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “While relocation is not an option for local residents, the elevated rents may intensify social discontent.”
Private housing rentals rose 1 percent last month from August to a record HK$20.60 ($2.65) per square foot, Centaline Property Agency, the city’s biggest closely held real estate broker, said today in a release, citing a survey of 85 major home estates.
Hong Kong’s consumer prices excluding distortions from government subsidies rose 6.3 percent in August from a year earlier. Home prices have jumped more than 70 percent since the start of 2009, prompting Tsang last week to revive a government- subsidized housing program that aims to soothe public anger.
--With assistance from Marco Lui and Kelvin Wong in Hong Kong. Editors: Andreea Papuc, Linus Chua
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