A Rentier Economy

What’s a Rentier Economy? This refers to an economy where businesses and individuals with the ability to purchase properties (commercial & residential) and rent out these properties for income. There’s nothing wrong with it, this being a function of demand & supply.

However, when prices of coffeeshops go above a certain amount, we can’t help but feel concern about how this will affect our daily cost of living.

For examples, when 2 coffeeshops changed hands for $41m & $40m recently in Tampines & Yishun respectively, Citizens voiced their concerns about how that will eventually affect the cost of their meals.

Blk 201 Tampines St.21 coffeeshop sold for $41m
Blk 848 Yishun St.81 coffeeshop sold for $40m

Will the Government step in to ensure that the costs of meals remain affordable for the man-in-the-street? This is what the the Minster of National Development has to say in his reply to a question made in Parliament. Click here to read his reply.

The answer by the MND implies that there are many coffeeshops in the neighbourhood, so consumers have a choice. They need not patronise the coffeshop that varies high rentals to the stallholders who then have to increase its prices for their meals in order to pay the high rentals.

The MND also said that imposing a cap on the increase of rentals of stalls might deter coffeeshop owners from making improvements to the coffeeshop. This is where it gets difficult to understand. Based on observations of past coffeeshops that have changed ownerships, most coffeeshops remian in their original condition. Little or bare noticeable improvements had been seen.

Here’s the question: What motivation is there for the coffeeshop owner who had just spent millions to buy over a coffeeshop to spend further on improving the coffeeshop?

What do you think?

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