Units that cost investor as little as HK$300,000 are now worth more than double the price When property investor Jan Lai bought 30 parking spaces along with a number of flats at Residence Bel-Air in Pok Fu Lam two years ago, he never intended the 2.5 metre by 5 metre units to be much more than accessories. 'I thought it would be easier for me to resell the residential units if they went with car park spaces,' he said. They've turned out to be quite lucrative on their own. The spaces Mr Lai bought for between HK$300,000 and HK$500,000 now sell for nearly HK$700,000 each. In a city obsessed by real estate, Mr Lai had discovered one sector of the property market that tended to fly under the radar of most investors. Thanks to the robust economy and developers' expansion away for the city centre, the demand for cars and parking spaces is rising. For example, the rental yield of parking spaces in the development Mr Lai bought into is about 5 per cent, said Benjamin Tong, manager of Ricacorp Properties' Residence Bel-Air branch - more than the 3 to 4 per cent for the luxury flats. 'It's not bad,' he said. The economics of buying a parking space makes it especially attractive to small investors. 'You may need HK$3 million for a flat, but just HK$300,000 for a parking space,' said Ben Or, district manager of Ricacorp Properties' branch in West Mid-Levels, an area where, due to short supply, there has always been a demand for parking spaces. Another advantage is that unlike a flat, where you need to spend money on decorating and furnishing to attract tenants, parking spaces make no such demands. But, of course as in any investment, finding the right parking space is not that easy. 'Many parking space owners do not want to sell. Moreover, the value of parking spaces vary depending on locations and quality,' said Mr Or. For example, in Conduit Road, they ranged from HK$300,000 to HK$800,000 each, he said. 'However, with some parking spaces in Conduit Road, the driver needs to take his car in a lift to the second parking floor. Because of this inconvenience, the value of these spaces will be lower,' said Mr Or. Location is also important. Property agents say urban parking spaces are better than those in rural areas such as the New Territories, where supply is plentiful. Prices of spaces in Sha Tin and Tai Po had not seen major increases since 1998, said James Tang, sales director for Midland Realty in the area. 'There are a small number of investors looking at this,' said Mr Tang, who estimated that prices for spaces in the area ranged from HK$100,000 to HK$300,000. Mr Lai, whose parking spaces are in a development a long way from an MTR station, said he looked for ones 'located in an area that is not well served by mass public transport systems. But they must be in upmarket residential projects, where people living there are sure to own a car.' But some people in the industry advise that if you can, go for flats. Parking spaces 'are still not a major investment compared with residential units', said Hendrick Leung Lee-chung, director of Centaline Finance, a mortgage broker owned by Centaline Property Agency. For one, he said, 'the growth potential will be smaller than apartments, which have good liquidity and strong demand. Plus the lump sum of each investment is small, so you will not make a lot of money with just one space. But it is difficult to buy many as owners seldom dispose of them,' said Mr Leung. In terms of financing, Mr Leung said some banks and financial institutions provided financing of 50 to 60 per cent and as much as 70 per cent for valued clients, compared to 95 per cent for home loans. The rates are around 2.25 percentage points below the prime rate, slightly higher than residential mortgages. Still, most property agents believe that buying a parking space is a safe investment and prices will rise at the same rate as residential units. 'With a return of 5 to 6 per cent, it is a stable long-term investment,' said Ricacorp's Mr Or.