Sunday, December 25, 2011

Hawker Rents

Dec 25, 2011

No more $2.50 chicken rice?

Hawker food prices may rise as subsidised rents are set to expire in the coming years

By Huang Lijie , Feng Zengkun

At the Zion Road hawker centre, a plate of chicken rice costs $2.50. But if you go to the coffee shop next door, be prepared to pay $3.20 for it.

At the foodcourt in the Great World City mall across the road, the price goes up even further, to $4.30.

Since the hawker centre came into existence almost 40 years ago, it has always been the lowest common food price denominator - guaranteeing cheap chow for the nation.

But that $2.50 plate of chicken rice may be a fantasy by the end of the decade.

The reason: Some hawker stall rents are set to soar by more than 10 times in the coming years due to expiring subsidies.

Stall owners in 15 food centres told The Sunday Times that when the rent hike comes, they will either raise their prices or quit the business.

The fallout could also affect food prices at their neighbours' stalls and at coffee shops and foodcourts, which sometimes peg the prices of their fare to those of nearby hawker competitors, The Sunday Times found.

In Clementi, Hougang and River Valley, where all three types of food centres can be found close to one another, the same dishes are priced within $1.50 of each other, with the hawker fare the cheapest.

This is why hawker rental fees must be kept low, argued experts.

'It's necessary so food prices do not escalate,' said Professor Lily Kong, vice-president of university and global relations at the National University of Singapore, who has written a book on hawker centres.

The secret to cheap food

Currently, prospective hawkers have to rent stalls from the National Environment Agency (NEA) or sublet them from other hawkers.

The NEA sets minimum rents determined by valuers for its vacant stalls and auctions them off every month.

Bidders have to be Singapore citizens or permanent residents, and the highest bidder gets the stall for three years, after which he gets priority to renew his lease, which comes at a new market rate.

If the minimum bid is not met, the stall is kept for the next auction.

The NEA also rents out stalls on one- to three-year leases on a walk-in basis, but these are typically leftover stalls in unpopular places.

The monthly rent ranges from $85 to $3,600 for market stalls, which sell sundry goods, although most stalls are rented for between $300 and $800.

The rent for cooked food stalls ranges from $300 to $4,900, but a majority are about $1,000 or more. Stalls in more central locations such as Newton and Serangoon easily command upwards of $2,500 in monthly rent.

Hawkers are allowed to sublet these stalls, even to foreigners, which may cause prices to climb higher in popular areas. At the People's Park Food Centre in Chinatown, for example, hawkers can pay more than $5,000 a month to sublet a stall.

But only half of the 15,000 stalls in Singapore have these market-determined rents.
The other half are now heavily subsidised or are owned by the hawkers themselves.

About 40 per cent of hawkers pay only between $56 and $320 for their stalls, possibly less than a tenth of the market rates.

This is mostly because they are first-generation hawkers, lured off the streets in the 1970s for hygiene reasons with the low-rent stalls.

Mr Chua Chuan Liang, 70, for example, has paid just $200 a month in rent for a minced meat noodles stall in the Clementi 448 Market and Food Centre for the past three decades.

The low rents are guaranteed as long as the hawkers personally operate them and do not sublet the stalls. When they die, their immediate family can also take up the subsidised stalls with the same conditions.

Another 15 per cent of the hawkers own their stalls, which they bought in the 1990s during a government project to encourage hawkers to be stall owners.

The costs of their 20-year leases were determined by valuers, and the hawkers were given a 30 per cent discount capped at $28,000.

These hawkers are free to resell their leases or sublet the stalls to anyone.

Mr Goh Chye Lee, 60, for example, paid $124,000 for his sugarcane juice stall at the Serangoon Gardens Chomp Chomp Food Centre in 1997.

This means his monthly rent, averaged over the 20 years, has been stabilised at just $520.

Subsidised and rent-free hawkers told The Sunday Times that this has allowed them to sell their food at lower prices.

Hawker Chee Hua Pheow, 62, for example, charges just $1.20 for a plate of stir-fried glutinous rice, among the cheapest meals sold at Chinatown's Smith Street Food Centre. He pays $320 in monthly rent.
The hawkers have also helped to hold down prices charged by their non-subsidised neighbours, and at coffee shops and foodcourts.

Ms Ng Siew Khin, 70, is Mr Goh's neighbour at the Chomp Chomp Food Centre and also sells sugarcane juice.

She pays six times his rent at $3,300 a month to sublet a same-sized stall, but sells the juice at the same price as Mr Goh - at $1.50 a glass.

'If mine is more expensive, nobody will buy from me,' she said.

Stall rents in coffee shops and foodcourts are determined by private owners who own the properties, or by the Housing Board, which leases stalls at market rents in 300 HDB coffee shops.

Checks by The Sunday Times at 40 coffee shops and foodcourts found that rents can range from $2,500 for a coffee shop stall in the heartland to $15,000 for a foodcourt stall in Orchard Road, also several orders above the subsidised hawkers' rents.

But the food sellers told The Sunday Times that they usually peg their prices to those of nearby hawker competitors, charging up to $1.50 more for the same dishes despite the much higher rental fees.

Mr Siva Kumar, 44, owner of an Indian Muslim food stall in a Ghim Moh coffee shop, sells prata for 80 cents, the same as that sold in the next-door Block 20 Ghim Moh Road hawker centre. This is despite monthly rents of $4,000, more than double that of his hawker competitor.

'If I don't follow the price in the hawker centre, customers will just go next door,' he said.

He covers his rent by offering a wider range of food items, such as Indian rojak, which he prices at 50 cents per piece.

The looming cost

But the era of low rents will soon be over for the subsidised half of the industry.

The first-generation hawkers can transfer their low rents only once to their family members.

After the second generation dies, or if the hawkers hang up their woks, the Government will take back the stalls and raise the rent back to market rates.

Ms Grace Fu, Senior Minister of State for the Environment and Water Resources, told reporters at a meeting about hawker centres earlier this month that the subsidies are unlikely to be extended.

Doing so would create hawker dynasties, making it harder for outsiders to gain a foothold in the industry, she said. 'I don't think a person should enjoy lower rents than her competitors just because her parents were hawkers,' she added.

This means many of the subsidies could expire within the decade.

The 20-year leases sold to hawkers will also expire between 2014 and 2017, after which those stalls will also be rented out at market rates.

At the Kovan Hougang Food Centre at Hougang Street 21, the end of the subsidies could mean a rent increase of more than 20 times.

One subsidised stall's monthly rent at the centre is $190, compared with $3,000 at the Government's non-subsidised rate and more than $5,000 if it is sublet.

Hawkers say food prices will increase with the rental fees.

Subsidised chicken rice seller Lin Leong Wah, 52, currently pays $200 a month to rent a stall in the Kovan food centre. He has dished out countless $2 plates, but said he would have to increase his price to at least $2.50 if his rent was higher.

'Otherwise how to survive?' he asked.

This may open the floodgates for their coffee shop and foodcourt competitors to raise their prices.

Mr Hong Poh Hin, 64, chairman of the Foochow Coffee Restaurant & Bar Merchants Association, which represents 450 coffee shop owners, said: 'If there is an overall increase in hawker food prices, coffee shop and foodcourt stall holders, especially those who have kept their profit margins very low to compete with hawker centres, will likely also adjust their prices to ease their burden.'

More complications

This spectre of rising food prices is among the top concerns of a panel set up to rethink the hawker centre.

In October, the Government announced it will build 10 new hawker centres after a 26-year hiatus.

It said this would provide cheap and good quality food for more Singaporeans; Ms Fu added that more stalls could help to spur competition and lower food prices.

The first centre will go up in Bukit Panjang within three years; the locations of the rest have not been determined but priority will go to the new towns, where there are fewer such centres.

Earlier this month, the Government unveiled a team of experts ranging from architects to food operators to come up with fresh ideas to run the new hawker centres. The panel will complete its consultation by next month.

Ms Fu said its solutions could be applied to the existing 107 hawker centres as well.

Social entrepreneur Elim Chew, who heads the panel, said keeping rental fees affordable will be among its priorities.

But hawker analysts said this may not be enough to keep the centres' food cheap, especially if the cost of living rises.

Ms Fu said there is no guarantee low rents will lead to low food prices. 'Some hawkers may choose to maximise their profits instead,' she said.

[No guarantee that more hawker centres will lead to better quality food or competition in food quality - only in pricing, and rental.]

The Sunday Times also found low-cost hawkers who sublet their stalls at higher rents to earn a passive income.

At the Chomp Chomp Food Centre alone, five of the 20-year leased stalls are legally sublet at market rents of $2,800 to $3,300 a month.

Hawkers who took over the long-lease stalls at the Kaki Bukit 511 Market and Food Centre in Bedok can even hand over more than $5,000 a month to their landlords.

Said one of the Kaki Bukit subletters, who declined to be named: 'The owner of this stall lives off my money in a bungalow.'

Others noted that low rents lead to problems such as limited opening hours.

Mr Patrick Sze, 51, chairman of the hawkers' association at the Clementi 448 Market and Food Centre, said hawkers tend to shutter their stalls once they hit a daily income target. He said: 'Subsidised stalls usually close after lunch because the owners have made enough to cover their low rent.'

And then there is the problem of manpower. NUS' Prof Kong asked if there are even enough passionate hawkers in the Republic to operate the new stalls.

'There is a concern that the quality of hawker food has declined because people with no skills or real interest enter the trade and treat it as a mere job,' she said.

["Passion"? I think many of the original hawkers also treated their jobs as jobs. For some, it was probably the only thing they could get, and they made the best of it. And those without ability (or passion) fell by the wayside, leaving those with ability, affinity, and perhaps passion. 

Today, people tend to have more employment options. "Hawkering" is not attractive. And passion comes few and far between.]

These interlinked problems will become even more stark as more Singaporeans eat out, said the analysts.

A national nutrition survey by the Health Promotion Board last year found that six in 10 Singaporeans eat out at least four times a week, up from five in 10 in 2004.

What is needed, they say, is a radical re-imagining of the Singapore icon.

The social solution?

One idea that has gained traction is that of a social enterprise. This would involve remaking the hawker centre as a non-profit place to provide cheap and good quality food. The idea was mooted by Environment and Water Resources Minister Vivian Balakrishnan in October and Ms Chew said the panel is considering it.

This would be similar to the role NTUC FairPrice plays to keep basic food items affordable, said Ms Fu. When global food prices spiked in February, the local supermarket chain froze prices for its house-brand rice for six months. It extended the freeze on its Thai house-brand rice on Thursday for another two months.

'Ideally, we want a hawker centre operator who can exert influence on opening hours, tenant mix and food prices,' added Ms Fu.

[Good luck. "Hawkering" is not easy. The Singaporeans have a dream. It does not include slaving over a hot stove for little profit. ]

Ms Chew declined to provide more details on this as the panel is still gathering feedback.

Others said the Government could continue to offer subsidies, but with more restrictions.

These include banning sublets and private stall transfer arrangements between hawkers, which the Government currently does not track.

Hawkers have demanded fees of up to $300,000 just to transfer their rentals of stalls in highly sought-after places.

Food guru K.F. Seetoh and MP for Moulmein-Kallang GRC Denise Phua have raised concerns that these practices could drive up food prices as the new stall holders try to defray the cost of such fees.

The Government alone should handle the assignment of stalls to prevent this, they said.

Mr Tan Chin Keong, an equity analyst at UBS Wealth Management Research with an interest in property, suggested an official day-and-night dual leasing model.

'Taxi drivers share their cars in shifts. This would help to lower rental and operating costs for hawkers,' he said, although he noted this would work only in areas that attract a steady crowd at all hours.

As for ways to suss out passionate hawkers and to hone their culinary skills, Ms Chew said stalls could be provided to young entrepreneurs.

[Offer "Heritage" hawkers, with proven track records, low rentals in prestigious sites. There are implementation details to be worked out - who decides what is heritage, what if the hawker wants to take it easy, etc.]

'Young people can explore possibilities for food start-ups and then move on to restaurants if they prefer that,' she said, noting that hawker centres have a lower start-up cost compared with more upscale establishments.

She added that the new hawker centres could double as a social safety net by offering jobs to the disabled.

Mr Nicholas Aw, president of the Disabled People's Association, said employing people with disabilities or setting aside stalls for them would create awareness of the issues they face and inspire the community.

But he added that the panel has not consulted his group.

'I hope the panel at least talks to a person with disabilities to understand what needs to be done for the idea to work,' he said.

Mr Seetoh said more should also be done to bridge the gap between the old guard and new entrants of the trade, and suggested setting up a cooking school to maintain a minimum hawker standard in the Republic.

Hawker centres in 2030

But whatever form the hawker centre of the future takes, it must not lose its role as a social glue, said Ms Chew.

She suggested that hawker centres be used for community activities in the future.

The panel is also considering installing wireless Internet at the centres for the connected generation.

And in a country where one in five Singaporeans will be 65 or older by 2030, hawker centres could even ease aching joints by delivering food to the elderly who live nearby, she said.

'Hawker centres have been in the lives of Singaporeans for decades.

'Now it's time to see how we can make it sustainable for generations to come,' she said.

[Edited 14 Jul 2014]

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