Daily Lessons from Life 14 March 2014 - Petite Hong Kong store sells at record price

MH370 Updates: STILL no traces of the plane. Latest theory is that it had been 'deliberately' flown toward the Andaman Sea. So, still keeping the hope up! Regardless!!

"Petite Hong Kong store sells at record price - AFP Friday, Mar 14, 2014

HONG KONG - A tiny Hong Kong store measuring just 130 square feet (12 square metres) has sold for more than US$23 million (S$29 million), as prices reach astronomical levels in a city ranked the most expensive for retailers in the world.

The southern Chinese territory was accorded the title by commercial real estate giant CBRE in February, as prime rents surpassed those of the most exclusive addresses in New York, London and Paris.

The shop, located in Hong Kong's retail heart of Causeway Bay, sold at a rate of HK$1.38 million (S$224,768) per square foot, breaking a previous Hong Kong record of HK$932,000 per square foot, the South China Morning Post reported Friday.

"Buyers probably think that Hong Kong retail prices are still on the rise," CBRE Executive Director for Retail Services Joe Lin told AFP, saying the buyer may have thought the store was a good investment.

Mainland Chinese tourists will continue to visit the city in large numbers and will "keep the rent at a very high level", Lin explained. He also said the ground-level shop, whose current tenant sells electronic appliances, was bought at such a high price because of the shop's prime location in the district. Lined with luxury stores, the area is near major shopping malls and attracts a large number of locals and mainland Chinese tourists.

Government figures show that visitors from mainland China accounted for 75 per cent of the city's tourist arrivals in 2013. Retail rents in Hong Kong's prime locations stood at us$4,334 per square foot last year, beating runner up New York at $3,300 per square foot by a large margin, CBRE said."

A distinction that even one of the freest capitalism practitioner in the world will find dubious to have in Hong Kong!

Lessons for me are:

1. is it a FACT that this tiny shop HAS been sold at that world record price. Is this FREE MARKET. The relevant authorities MUST make sure that it is a real transaction between a very optimistic and positive buyer and the very clever and sharp seller! There must not be any hint or trace of 'manipulation of the price';

2. whatever the reasons and justification provided by the so-called market experts and vested interests, the ultimate test is: can the buyer MAKE money out of this deal? IF it can, it is a good deal and a visionary deal! If it starts the NEW round of spiraling prices for the sellers, it gets even higher mark for injecting life into the seemingly softening market. IF NOT, if it unraveled after a few months, the press BETTER follow up and report on it too. Only then can the public get a fuller picture of the 'real' prices of the market!;

3. EVEN if the buyer CAN sell or make a profit of selling or renting this tiny shop, what does it mean for the bigger and overall market? Should the authorities be involved in judging that the price is UNSUSTAINABLE and damaging to allow to create the next round of rising prices? If it is already DEEMED unsustainable, how much higher will the authorities allowed the 'market' to test the limit? Is it ok AS LONG AS any sudden drop to the previous high has NO or minimal impact on the market's stability, the merry-go-round can be allowed to continue. When it is OVER-leveraged to the Nth degree, may be something has to be done. If it is a bubble, you want to prick it before it become too large and dragging in too many inter-linked webs of market participants like banks.

Simple logic says it is CRAZY. Innovative and visionary risk takers say: the sky is the limit! Who is right?