'Sharks' not at fault

RENTS are not rising in Hong Kong because landlords are ''sharks''; nor will rent controls prove successful. Prices depend on demand and supply, and when demand exceeds supply they go up. Incidentally no one complains when stock prices rise! The problem with ''excessive'' rents in Hong Kong is not ''shark landlords'' but Hong Kong's incompetent Government.

Since my arrival in Hong Kong in 1973 I have argued that Hong Kong's real estate should not be in the hands of its Government, which controls its supply. It should have been distributed to the people of Hong Kong through a massive privatisation programme. Since the Government never releases sufficient land at its yearly auctions, the supply side has been kept artificially tight at a time when demand has increased sharply. As a result of this ill-conceived Government policy, prices have soared.

And why has demand increased sharply? The pegging of the Hong Kong dollar to the US dollar by the Financial Secretary has meant that for the past few years Hong Kong has experienced negative real interest rates. Negative real interest rates discourage savings and encourage speculation, as asset prices appreciate at a faster rate than borrowing costs.

Who should tenants in Hong Kong, who are about to become an endangered species, target in their campaign against soaring rents? I suggest it be the Hong Kong Government, which has concentrated on political rather than on more pressing economic issues, and not the ''shark landlords'' who are only responding to the inherent market forces of a capitalistic system.