(Photo : Google Maps)
The world’s costliest building it has become. Yesterday, “The Center” in Hong Kong – a 73 storey landmark was sold for $ 5bn. Yes, FIVE BILLION US DOLLARS. For a single building. No you are not hallucinating. It really did happen.
The Centre was a jewel in the portfolio of Li Ka-Shing. If you don’t know who he is, well, he was, and probably is, Mr Hong Kong. One of the richest men in the world. For long he has symbolised money, power and all the glamour of Hong Kong.
This post is not about the old man. It’s about insanity in property valuations. Yes land is scarce (anybody who has been to Hong Kong knows how scarce). And yes, it is demand and supply that sets prices. And yes, it is a free market – nobody is compelled to buy or sell at any price. But even then, it is only right to pause and reflect on what such insane property valuations mean.
It means, most of the world’s population cannot afford a house. Full stop. This is one of the biggest problems in the developed world (ask any Brit how bad it is), and increasingly in the developing world. It simply drives up the cost of doing anything . In India for example, the tuition fees in a school are not for teachers – it is really to pay for the property. Ditto hospital costs. It is also the reason why you will never see a typical supermarket in the city of Mumbai .
Such ridiculous property valuations are one of the greatest causes of wealth inequality. The very few, who for historical reasons happened to inherit land, or buy property make wild fortunes at the expense of the large majority. After all any pricing is simply the value that society collectively places on any dimension of life . Is anybody in the world seriously going to argue that property must be placed on a far higher pedestal than virtually anything else in life ?
Back to the $5 bn building. In case you have some difficulty comprehending what $5 bn is, it will pay for 12 years of Honk Kong’s spend on Child and Family Services or 6 years of the spending on the elderly, or 7 years of spending the on the disabled or 20 years of spending on youth or 2 years of the entire police budget or 4 years of the health budget …… Shall I go on ?
Readers must know that this blogger is taking a grave risk by putting up this post. A reader, who is a dear friend has castigated me for becoming a raving loony leftist and has threatened to personally come and clobber me if I write one more example of becoming a “commie” in old age ! I will have to take precautions for my safety tomorrow !!