Hong Kong leader Donald Tsang pledged Wednesday to tackle the city's soaring property prices, which are squeezing the middle class and fuelling popular anger at his administration.

The chief executive also presented a bleak assessment of the world economy and warned that the southern Chinese territory faced "enormous inflationary pressure", particularly in the form of rocketing food prices.

"I am very concerned about the impact of high inflation on the livelihood of our people, especially the grassroots," he told lawmakers in a speech that was twice interrupted by noisy protesters.

"We are not optimistic about global economic prospects next year. We may see inflation and recession come one after the other," he added.

Demand from wealthy Chinese investors has driven apartment prices beyond the reach of many low and middle-income earners in the Asian financial hub of around seven million people, triggering a slump in Tsang's approval ratings.

Home prices jumped 56 percent between 2008 and 2010 and another 18 percent in the year to August.

Tsang talked up his government's achievements in posting growth of seven percent last year, but admitted the "wealth gap" and housing affordability remained among the "issues of greatest public concern".

"People have become frustrated because it is more difficult for them to own a home," he told lawmakers in his final annual policy address, the government's policy blueprint for the year ahead.

"I am striving to tackle the problem by increasing land supply, combating property speculation and adjusting our subsidised housing policy," said Tsang, sporting his trademark bow tie.

He announced the resumption of a subsidised housing scheme for low-income residents, promising to deliver 17,000 subsidised flats for sale from 2016 to 2019.

The policy would target families with a monthly household income under HK$30,000 ($3,855).

A study by US consultancy Demographia in January found that Hong Kong's home prices were the least affordable in the world.

"Despite sustained economic growth in recent years, the widening of the wealth gap is still a source of social discontent," Tsang said.

He added, however, that redistribution of wealth did not mean changes to the territory's low-tax status.

"As a highly open economy, Hong Kong must preserve the distinct economic features that have underpinned our success," he said.

Average inflation in 2011 was expected to reach 5.4 percent, the highest annual rate since 1997, the chief executive said.

"The government will strive to ease domestic inflationary pressure by such measures as cooling the property market and preventing excessive credit growth," he added.

The government would expand the sources and types of food supply in a bid to ease price pressures, after retail food prices rose 9.1 percent year-on-year in the first eight months of this year.

Tsang was making his final annual policy address before he steps down in June next year at the end of his mandate, having served in the post for seven years.

Hong Kong's chief executive is appointed by a committee selected by the central government in Beijing.

Shares of Hong Kong property firms rose on the local Hang Seng index in response to the promise of more development, with SHK Properties up 2.3 percent to HK$98.65 and Henderson Land up 2.2 percent at HK$38.00.