Pessimism and despondency are sweeping through Hong Kong - property prices are slumping, consumer spending is shrinking, and the Hang Seng Index is sinking. Hong Kong is heading for a difficult recession and worse still, no one, Chief Executive Tung Chee-hwa and Financial Secretary Donald Tsang Yam-kuen included, seems to know when it is going to be over. From a prosperous metropolis to a city shrouded in gloom and doom, Hong Kong is experiencing negative economic growth for the first time in 13 years. For Hong Kong people, spoiled for so long by high growth and swelling wealth, this is anything but palatable. But does the Government have a cure and can officials turn the situation around? We want to know when we will see the light at the end of the tunnel. Ordinary folk are anxious to know. Unfortunately, the Government does not seem to be in a position to answer the questions. We heard what Mr Tung had to say: 'We are now in the depth of a major economic adjustment, the result of which may be prolonged and painful to everyone . . . In a free market economy and an economy which adjusts very quickly, upward or downward, what Government can do is not a whole lot. And I am being honest.' That admission, frank though it was, offered no consolation. The message is loud and clear: yes, it is going to be tough, but sorry, there is very little that the Government can do. So what has gone wrong? Officials keep saying the regional financial turmoil is to blame. They also say it is a question of psychology - Hong Kong's economic fundamentals remain strong, the problem arose because locals were not positive enough to drag themselves out of the feel-bad mood. But is that really all there is to it? Balancing all factors, perhaps the defence has a certain credibility. The looming recession is a product of the collapse of the stock and property markets which, in turn, was triggered by the regional financial crisis. And the majority of people have not become poorer overnight. Yes, the unemployment rate is rising, but we are talking about 3.9 per cent of the workforce, a figure that still makes us the envy of many other countries. More importantly, Hong Kong people's wealth has not disappeared overnight - before the financial turmoil, our combined deposits in licensed banks alone was an impressive $2,644 billion, and after the crisis the total is much the same. Many of us only feel poorer because the paper value of our assets is shrinking quickly in the light of the rapid fall in property and share prices. Of course, there are those who have suffered seriously - those who bought their flats and shares when prices peaked last summer and are suffering from the acute pain of negative wealth. And many are also panicking over the spate of closures of firms. The middle class, who thought unemployment was the monopoly of the poor, are now feeling the heat too. Will they be next on the jobless list? There are mortgage bills to pay. Properties can be sold to cut spending, but that is a major sacrifice. And even then the market might not be there. Caught in the predicament of having negative assets, they may have to mobilise more funds to pay back the banks before their property can be disposed of. These are worries that pepper the daily conversation of people who are, in fact, in no immediate danger of losing their jobs. From this point of view, it is fair to say the problem is all psychological. But take a closer look at the whole problem. It goes beyond that. The way domestic policies have been handled have made things worse. Over the past few months, the business sector has showed its growing frustration with the Government's housing policy. Academics also voiced their disapproval of officials' heavy-handed interference in the housing market. To them, the annual building target of 85,000 flats is bad enough, but the launch of the tenants purchase scheme (TPS), allowing public rental housing to be sold at an exceptionally cheap price, was disastrous. The Government's intentions may have been good, but the way the plan was executed is open to question. For instance: if public housing estates with a sea view or in a central urban area can be sold at prices like $250,000 to $350,000 each, what motivation is left for people to buy private property which costs millions of dollars more? In drawing up the housing package, officials seem to have forgotten that in Hong Kong people buy property not only because they need accommodation. They also do it for investment purposes. Over the past decade, despite the ups and downs in the real estate sector, home-buyers were confident their purchases were the best way to secure their wealth. Most home-buyers are not greedy speculators, they are hard-working end-users willing to save every dollar to pay for a huge mortgage bill because, with asset price inflation, they believe that property ownership is a form of retirement protection. But if the Government is flooding the market with a huge supply, the value of their investment is under threat. What room is left for prices to go up steadily? Officials may say our aspiration of upgrading our accommodation is an incentive to trade up - first from public rental flats to home ownership scheme (HOS) premises, and finally, to the higher quality private housing - so the market will still be very active. In reality, though, many people can upgrade accommodation without moving. Given the good locations of many public housing estates, tenants who are willing to spend a few hundred thousand dollars redecorating their units can create a better living environment. So why should they bother to spend millions of dollars to trade up, especially when the threat of a recession is looming large? It is this changing attitude to property purchases by ordinary home buyers that escalated the acute fall in the property market. The TPS has not only sent the private housing market into a nasty tumble, it also dragged down the trading of home ownership scheme flats. And now, Hong Kong people are locked in a vicious circle - home owners' loss of wealth, be it perceived or actual, is dampening interest in spending. And ironically, would-be buyers are also less inclined to buy, even though property prices have become far more affordable. With shrinking demand, inevitably, prices will go down further. This loss of vitality in the property sector is not an isolated matter. It poses a serious problem for the overall economy. In the past decade, the real estate sector was the driving force for the economy, it was a key source of government revenue. With the market collapse and its recovery hanging in the air, no one is sure what there is to lead Hong Kong through to an economic take-off. This is where our problem lies. The community agrees with Chief Secretary for Administration Anson Chan Fang On-sang's emphatic remarks that local people's most pressing concerns are the economy and the unemployment problem. But actions speak louder than words. Now that Mrs Chan has raised the public's expectation the Government will concentrate its efforts on sorting out the economy, we want to see concrete measures taken promptly to tackle the problems. Mr Tsang's proposals yesterday do not go nearly far enough in addressing the problem. If officials genuinely want to hold up public confidence in the economy, they are not as helpless as they have sounded. As an immediate relief, cutting interest rates would be an effective measure. And in the longer run, restoring the old policy of non-interference in the property sector would be a most welcome step. Hong Kong people are not unreasonable. They are realistic enough to appreciate that in a situation complicated by factors outside Hong Kong's control, there is no magic formula or instant cure to the economic downturn. That said, the community needs a sense of direction. They want to be reassured the leadership is responsive to their needs and concerns. Now that legislators-elect from different political factions are willing to set aside their differences and work together to tackle the crisis, it is even more important that the administration should be prepared to tap their advice. Hong Kong has now reached a critical stage - it is make or break for our economy. To avoid sinking further into an economic downturn, a united front is needed. It is time for the Government and the elected legislators to display their leadership and co-operation. That is the only way we can be the first in the region to steer through the financial storm.