It gets worse. The photos are not the bottom of the barrel when it comes to Hong Kong real estate. Those who are in the worst poverty are the ones who live in cages. It's literally a bunk bed with sides enclosed with cage wiring. They have no walls, minimal possessions and live day to day. http://www.youtube.com/watch?v=HU4jjdRzy3w Hong Kong is an intriguing city that I highly recommend to go spend some time in.
Good video. I disagree that the government should do anything about it though. What's the alternative, make them homeless? If there is both supply and demand, let people do what they want. If San Francisco allowed this, there would be far fewer homeless people, but the only options they give them are $2,000 a month apartments or living in the streets. So lots of people live in the streets.
Does letting people do what they want include building without permits (esp. on allotments not designated for housing)? It doesn't work this way, governments already exercise strong control over the housing market due to laws and regulations.
I don't live in HK, but where I live, the large property funds (whose demand has nothing to do with housing) have a dramatic effect on prices - they cause an artificial shortage by purchasing everything on the market, thereby increasing the value of their own portfolio (and their rents). So just "letting people do what they want" isn't going to help the housing situation, it just increases the GDP. The government should use the increased taxes (if any - too many loopholes) to compensate the negative effects.