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SCMP Reporter

IF you thought mortgages only applied to buying a home, you had better think again. Mortgages can now be obtained from banks to buy a car parking space.

  While car parks were usually attached to flats in a sale transaction, developers have terminated this long-term relationship.

   Some car parks in popular areas such as Central and Wan Chai are now independently sold to interested parties.

  Bank of America (Asia) spearheaded the move by providing financing for car park purchases in a systematic way a few weeks ago.

  The car park mortgage has been made possible by the surge in the price of parking spaces in the past year.

  'Ten years ago, we were talking about $20,000 for a car park [parking space]; now it is $400,000 or, in some popular areas, $1 million to $1.2 million,' said Samuel Tsien, chief credit officer at Bank of America.

  The higher the amount, the stronger the financing need and the more viable it was for banks to offer lending facilities to buyers.

  According to Government statistics, about 2,000 to 3,000 independent residential car park transactions were recorded last year.

   Mr Tsien believed there were more unreported cases.

  Yet, innovative as it is, difficulties abound and caution is warranted.

  While a 70 per cent loan to valuation ratio is considered a safe cushion against possible risks on residential mortgages, 50 per cent is the maximum level for car parks.

   The difficulty in accurately assessing the value of car parking spaces also calls for a larger cushion against price fluctuations.

  It is also generally recognised that flats are consumer necessities, while car parks are not.

  'The appraisal of the car park's value is based on similar transactions in the last two months within the same premises. Such an approach is subject to distortion,' Mr Tsien said.

  If the last buyer was a live-in tenant and was willing to pay a high premium for the car park, then the price of the parking space may have been inflated.

   It was also difficult to confirm whether the car park would be owner-occupied.

  'The ratio will be even lower for buyers who are not tenants of the building where the car park supposedly belongs,' said Mr Tsien.

  Geographical location was another field the bank needed to watch out for. Because a liquid secondary market was crucial to protect the bank against defaults, the car parks had to be in high-density residential districts.

  To avoid fuelling speculation in car parks, the bank would ensure, during an interview session, that the applicant could establish the need for a car.

    Because car park financing was a type of loan lent for a specific purpose, it was priced lower than general multipurpose personal loans.

  While the Bank of America charges 0.75 per cent per month on personal loans, which yields an annualised rate of 17.5 per cent, car park loans offer a lower rate of prime rate plus 2.5 per cent. A fee of $1,500 is levied on successful cases.

  Mr Tsien expected a low delinquency rate for the new product.



Mortgages fund cost of parking