Why Europeans should be wary of 'Goldilocks' MTR

September 18, 2017 13:57
MTR Corp will strive to boost its European business as part of the rail operator’s growth strategy, says Chairman Frederick Ma. Photo: Bloomberg

MTR Corporation, Hong Kong's commuter rail operator, feels it should be making a lot more money, given its strengths and solid track record.

Last week, Chairman Frederick Ma Si-hang organized a media tour to London and Stockholm to help reporters understand better the company's prospects as it seeks to expand its overseas business.

UK and Sweden were chosen as MTR is involved in projects in those two countries, initiatives the firm hopes will lead to more European business and create a new growth engine for the company.

To get his message across, Ma compared the new Crossrail Elizabeth line that MTR secured in July 2014 in the UK to the Shatin-Central link in Hong Kong that connects a rural area with the city.

The rail chief admitted that new lines in Hong Kong are losing money one after another. But the rail/property model the company plans to export to Europe and elsewhere overseas is something Hong Kong people should be proud of, Ma said.

Other countries can benefit from adopting the Hong Kong model where rail projects and property development go together, he suggested. 

Now, we doubt if Ma's claims will be accepted easily by European nations, regardless of MTR's reputation for efficiency and sound planning for critical infrastructure. 

Authorities in major European cities should be well aware of Hong Kong's runaway property prices and how MTR Corp may have contributed to the problem, rather than alleviate the situation.

In Hong Kong, purchase of homes above or near rail stations has pretty much become the formula for many people to move up on the wealth scale in the past four decades.

The hype and frenzy surrounding MTR projects, however, had negative consequences overall for the city, as home prices shot up ever higher, putting them beyond the reach of the ordinary folk.  

While MTR Corp and those fortunate enough to buy homes near the rail stations made hay, for the general public it was an unending tale of woe.

Given the experience of Hong Kong, why would any European city want to risk a housing bubble by adopting the MTR model of infrastructure development?

Also, would the people living in European cities want the kind of cubbyhole apartments that are put up by MTR in partnership with private property developers?   

Apart from the shrinking units, where the actual space available for residents is a fraction of the gross floor area, there is also this issue: developers seeking to utilize as much as possible of sites, adding to the urban density problem. 

Hong Kong people have seen how some buildings in Tseng Kwan O, for instance, have seen projects scaled up to 70 floors, from 40 floors envisaged originally, thanks to the expanding plot ratio.

Living in one such building, I can tell you that the property management fee is going up nearly 10 per cent each year. The amount I pay as fees is more than the rental of some public housing units in Hong Kong.

I doubt if the shopping tenants are any better, as we know that almost half the shops in MTR malls see new occupants once three-year leases expire.

As the operator demands ever more rents, many shops are forced to look elsewhere for affordable space.

The more I get to know about the MTR Corp business, the more I am reminded about the children's fairy tale of Goldilocks and the Three Bears.

Substitute Goldilocks for MTR Corp, and put property owners, shop tenants and passengers as the three bears, and you get the drift of the story.

Given all this, I would expect a country like Sweden, which is home to top-class home design firms like Ikea, would think twice before roping in MTR for more infrastructure ventures in the country.

Smart city initiatives may not go in line with the rail operator's money-making model.

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EJ Insight writer