Although Hong Kong has earned a world reputation for its laissez-faire policies, there is a widespread misconception that the Hong Kong government never intervenes in the markets.1 A disastrous fi re on Christmas Day in 1953 pushed the government to implement the fi rst public housing programme in 1954 (Housing Department 2003). Since then, the Hong Kong government has participated in the housing market aggressively.2 As of September 2005, the stock of permanent public rental housing and subsidized sale fl ats was about 1,107,000 units (Census & Statistics Department 2006). These housing units included living quarters built under the Housing Authority’s Home Ownership Scheme, the Private Sector Participation Scheme, the Middle Income Housing Scheme and the Housing Society’s Flat for Sale Scheme and the Sandwich Class Housing Scheme. In the past, the government also provided different types of direct fi nancial assistance to

public and non-public housing tenants to purchase their own fl ats. However, various fi nancial assistance schemes were put to an end in recent years.