• Sat
  • Jul 12, 2014
  • Updated: 8:26am
PUBLISHED : Tuesday, 08 October, 2013, 12:00am
UPDATED : Tuesday, 08 October, 2013, 2:36am

Soaring rent risks the city's status as shopper's paradise

It's cheaper to pay 12pc sales tax and buy a pair of jeans in Manila than get them here tax-free

Hong Kong will continue to lose its competitiveness relative to other Asian cities even if it doesn't impose a tax on goods and services.

Why is this city losing its lustre if consumers aren't burdened by the sales tax in place in other places in Asia? The answer is obvious: the sky-high cost of renting shop space here.

The operator of a Japanese restaurant in the busy Causeway Bay district explains Hong Kong's worsening problem.

"For every HK$10 of sales my restaurant makes here, HK$6 goes to the landlord. But in Tokyo, rent is the third biggest expense, after food and salaries," he said. "It's getting more and more difficult to operate a business here."

The restaurateur's observation was echoed by a friend from the Philippines and a former journalist, now based outside London, but who visits Hong Kong once every year. This friend shops regularly here because of the choice available, and, more importantly, the absence of a sales tax.

He bought a pair of popular brand name jeans for HK$900 in Hong Kong recently. Later, he found out they are sold for less in Makati, the business district of Manila, even with a 12 per cent value-added tax.

It's the high rental costs in Hong Kong that causes the price discrepancy.

Although rents in prime locations have stopped rising due to the slow down of spending by mainland tourists on luxury goods, the city remains the most expensive place in the world for retailers to open shops.

When you compare the rise in residential and shop prices in 2011 and 2012, you see that residential rents jumped 15.8 per cent last year and 3.1 per cent in 2011, according to Midland Holdings. For the same period, Savills data shows that street-shop rent in prime locations like Tsim Sha Tsui rose 25.3 per cent last year and 34.4 per cent in 2011, with rental costs in Causeway Bay surging 19.9 per cent last year and 38.2 per cent in 2011.

Fuelled by an influx of mainland tourists and limited supply of retail space, rents have soared, with international chains paying "tens of millions" of Hong Kong dollars a month in prime locations like Causeway Bay for their flagship stores.

More recently, luxury jeweller Tiffany & Co agreed to pay HK$5.7 million, or HK$1,500 per square foot, for its 3,800 square foot ground-level shop at Times Square in Causeway Bay, according to Colliers International.

To alleviate the pressure on retailers, the city should increase the supply of retail space. Otherwise, Hong Kong's reputation as a paradise for shoppers could be lost to other cities.



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This article is now closed to comments

This is also the reason why unskilled workers in Hong Kong earn such dreadfully low wages for working very long hours.
The various chambers of commerce in Hong Kong scream loudly whenever the topics of minimum wage or standard working hours issues are raised.
Not a word is said by their leaders, however, that businesses would be able to afford better working conditions for low-paid employees if rents were lower.
Some large employers have even been lobbying Government to relax labour importation controls so that wages can be kept low and "competitive". Not a word is mentioned about the impact of high rents.
It is time for landlords to be burned at the stake!
Hong Kong’s sales tax is hidden in the property cost when land and finished property are bought. Since the colonial days, government has been collecting otherwise known as sales tax but in one go as reflected in our rent we pay too. To government it is the most sure and efficient way in collecting tax. It is so efficient that the FS can’t even plan ahead rightly of a coming fiscal year from selling land and property. While it is efficient, it is a damn lazy way with consequences. Hong Kong people must pay extra in their mortgage to cover the ‘pre-sales tax’ so to speak. Banks in Hong Kong are just as happy. Until today, people yet have to figure out undo such intractable consequences. But, in fact, any government official is actually studying the problem? I doubt it.
Food quality in hk is dropping drastically. Imagine if restuarnts is paying 60% of cost as rent, how much food are you eating after labour and other costs? Honetsly, I can't find a decent resasutamt in HK that I really want to go back to eat with good food quality, atmosphere, service and good price. Let me know if u find one.
What paradise? I Never shop here myself as choices are little n expensive, and worst is shopping experience is the worst with crowded space n not so friendly staff. It is time for hk to rethink not too complacent.
It's not the landlord rather it's the property agents! With little sales in properties, agents worked to pushed the rents higher thereby getting higher commission.
Unfortunately, the way this city works, is that if more retail space is made available, it would be just as expensive or more....it's called GREED, which HK landlords excel at better than anywhere else in the world.


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