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Li Rong, a 37-year-old woman, sits on a bed in her 35-sq-ft subdivided flat in an industrial building in Hong Kong.TYRONE SIU/Reuters

In a cramped space on the fifth floor of an old industrial building in Hong Kong, Huang Shaochang and his wife live in some of the priciest real estate per square foot in the world – a 35-sq-ft room with a bunk bed and small TV.

Sky-high property prices forced them into these squalid conditions and prompted the Hong Kong government last month to impose measures to rein in residential home prices, which jumped 20 percent in the first nine months of this year even as the economy contracted 0.1 percent in the second quarter.

In October, Hong Kong leader Leung Chun-ying singled out the re-emergence of cage homes – wire mesh hutches stacked on top of each other – and cubicle apartments such as Mr. Huang's as issues that highlighted the gravity of poverty that existed alongside one of Asia's glittering financial centres.

More than 1.1 million people, or 17 per cent of Hong Kong's population, lived below the poverty line in 2011, earning less than $3,500 Hong Kong (about $450) per month, according to the Hong Kong Council of Social Services. It defined poverty as earning less than half of the average monthly income.

Mr. Huang, a part-time labourer who moved to Hong Kong from Shanghai two decades ago, pays $1,400 Hong Kong a month, or around $40 per sqare foot, for his tiny room, compared with average rents for second-hand homes of around $21 per sq ft.

"I never expected the situation would be like this in Hong Kong. I cried every day when I first came. I just wanted to go back to China," said his wife, Li Rong, who arrived two years ago after leaving their now eight-year-old son behind.

The former British colony's yawning wealth gap and protests over soaring property prices have brought Mr. Leung, who took over as chief executive on July 1, head-to-head with some of the city's billionaire property developers, who some analysts say could turn on the leader.

"Hong Kong is still monopolized by property developers and if they can't stand it anymore, they will go to Beijing to complain," political commentator Chip Tsao said.

"He has to be careful not to undermine China's interests. There are so many rich Chinese and high-ranking Chinese officials holding top-class properties in Hong Kong and these were bought at very high prices."

Octogenarian tycoon Li Ka-shing, who controls property giant Cheung Kong (Holdings) Ltd., stood by Mr. Leung's main rival and early front-runner, Henry Tang, in the leadership poll in March, even after Beijing signalled that it favoured Mr. Leung.

Although Mr. Leung was chosen by a 1,200-member election committee, central government leaders in Beijing had said they wanted a candidate with broad popular support. Mr. Tang, who was perceived by many in Hong Kong as in the pocket of tycoons, floundered after a series of scandals.

A subindex of Hong Kong-listed property stocks that includes bellwethers Cheung Kong and Sun Hung Kai Properties, Asia's No. 2 property developer by market value, lost as much as 4 per cent from its close on Oct. 26, after the latest measures to rein in home prices were announced, although it has since mostly recovered.

Mr. Leung has said he cannot rule out further steps and some market watchers say the latest curbs, including a 15-per-cent tax on non-resident buyers, may only temporarily deter cash-rich mainland Chinese, who many in Hong Kong blame for pushing up prices.

Mainland buyers accounted for 21 per cent of new homes in the small and mid-sized house sector in the third quarter of 2012, according to a report by Centaline Property agency.

Real estate prices are now 107 per cent higher than their trough in 2008 and 26 per cent more than the previous peak hit in 1997, and it's not just the city's poor who are feeling the squeeze.

A managing director at a large U.S. bank, who has lived in the city for more than a decade, said a joke now often repeated in industry circles quips that: "The only place where a rich banker feels extremely poor is Hong Kong."

Compounding the grumbles stirred by record property prices, the generous housing allowances that were once the norm for expatriate staff in the financial industry have been phased out, so professionals in the business are facing steep jumps in housing costs once their rental contract lapses.

"Most people in my group are beginning significant downgrades – like 50 per cent down," he said.

In Yuen Long district, a former farming area about an hour's commute from the heart of the financial district, home prices have also surged, buoyed by growing demand from mainland parents eager to educate their children in the city.

"I think about 30 to 40 per cent of mainland [buyers in Yuen Long] bring their children to the schools," said David Tang at Midland Realty in the New Territories district, adding that prices there have risen about 20 per cent in the past two years.

In Tuen Mun, near the prestigious Harrow International School that opened this year, prices have jumped 50 per cent over the past two years, according to Centaline Property agency.

As soaring property prices squeeze people on both ends, Mr. Leung will have his work cut out to satisfy everyone.

"I believe executive Leung is a hard-working and trustworthy leader. But I hope he can do more for minorities like us," said Mr. Huang, sitting on the lower bunk with his wife.

Another tenant in a similar-sized room on the same floor, which is about 900 square feet in total and home to nearly 30 others, doesn't hold out much hope.

Unemployed Xie Wingjie, 39, originally from Hong Kong but who grew up in the U.S., said he has few options.

"I just go with the flow and see what happens. There is no future here. How simple is that?"

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