Putting the cart before good economics
Forget stocks, property and gold. The hottest investment in Hong Kong right now is the humble golf cart. Not just any cart - only the ones in Discovery Bay will do.
A golf cart sells for HK$85,000 to HK$90,000 anywhere else in the city, but at the upmarket residential estate on Lantau, a cart costs as much as a Porsche or Maserati. Prices have shot up from HK$1 million to HK$2.2 million in a year, mirroring the insanity in the property market. Some brokers say no one is selling at the moment because everyone is waiting for prices to hit HK$2.5 million.
How did this happen? The growing population at Disco Bay, the ban on taxis and private vehicles, and a strict quota on carts - all have meant that demand has far outstripped supply.
The Transport Department has capped the number of carts at 490. Meanwhile, developer Hong Kong Resort Co keeps building more flats and houses. Once in Disco Bay, travel is restricted to walking, bus or cart.
Landlords now routinely sell or lease their properties along with a cart, which has become a status symbol on the estate. Renting a cart costs up to HK$9,000 a month, thus earning a respectable 5 per cent yield for the owner. This surely beats putting money in the bank or even buying an expensive flat to earn rent.
As a result, there is now an active market trading these carts. It is showing all the classic signs of a bubble.
Hong Kong Resort Co has asked the government to increase the quota. Streamlining bus services and relaxing the taxi ban are also being discussed. Meanwhile, the property market is showing weaknesses. Any such moves would cause the golf cart market to fall, if not crash. The rush to the exit, always ugly, may come faster than these carts.