Hong Kong’s high rents and ‘evil landlords’: a fact check
It is not difficult to meet people who are of the opinion that most of Hong Kong’s problems are caused by high rents. Such people assume, perhaps without realising it, that if the rapacious landlords were to lower their rents, the kind and generous tenants would pass the extra saving onto the customers, instead of pocketing it themselves.
In The Wealth of Nations , economist Adam Smith tells us what everyone implicitly knows – rents are negotiated. As he puts it, the landlord estimates what profit the premises can generate and will try and leave as little as possible to the tenant; the tenant does the same and will try and leave as little as possible to the landlord. The two will then negotiate, and by some imperfect process, may or may not come to an agreement.
When a company posts an executive in Hong Kong, it does so because this will generate a profit for itself. Why should the landlord in whose flat the executive will stay leave all the profit to the company?
In spite of the high rents, prices of everyday goods in Hong Kong are still very reasonable, if not cheap. This is because of the high turnover.
Landlords in general have more to gain by renting out their premises than by leaving them vacant, and so will adjust rents according to market conditions.
P.K. Lee, Tung Chung