Market that enriches landlords is impoverishing wider economy
Bernard Chan sees a need to rethink many calculations of profit and loss
On a street in Soho, there's an old-style family-owned grocery store. It has wooden barrels of rice on the floor and bottles of soy sauce on the shelves. It is left over from the days before the neighbourhood became a trendy dining area. The owners could make maybe HK$100,000 a month just by renting it out, yet they carry on opening the shop and working every day.
The building where I work has shops on the lower levels. There was a tiny place that sold overseas magazines, but in this case the owner-operator wanted an easier and probably more prosperous life. He rented out the premises, which I heard will become part of a bank. I am told that he gets HK$50,000 a month for the roughly 100-square-foot space.
Free-market economists would say that the magazine store owner did the right thing, and not just by optimising his own returns. By renting his space to the highest bidder, he opens the space up to whoever can use it to create the most economic value.
Others might say that money isn't everything. Maybe the Soho grocery owners get pride and pleasure from their business, and no amount of extra income could replace that. Also, the little shop is important to the older residents. Who needs yet another trendy restaurant?
We have always had a shortage of space in Hong Kong, and it seems worse than ever. Fast growth in financial services and tourism is squeezing smaller businesses out in many neighbourhoods. Landlords squeeze more and more money out of tenants, while everyone else has to pay more and more rent or through rising prices.
Ultimately, this is not sustainable. People get angry, and we will end up with a situation where the side effects of our "free market" threaten social stability. Young entrepreneurs have an especially difficult time, and it is easy to see why they might agree with people in their age group who complain about property hegemony.