Hong Kong’s record-breaking parking space market set to lose steam, say analysts
- As the economy starts to stutter some Hongkongers will sell their cars to save money, denting demand for parking bays, says one expert
- The number of parking spots changing hands fell from a peak of 1,348 in June to just 377 in November, the lowest for almost three years
Hong Kong’s famously lucrative market for car parking spaces may be about to stall, according to analysts and investors.
Prices of parking bays, which peaked this year at an average HK$2.25 million (US$290,000), are likely to drop in the short term as demand wavers amid a souring property market, rising interest rates and the US-China trade war.
As the economy starts to stutter some Hongkongers will sell their cars to save money, further denting demand, said Lai Wing-to, a veteran property investor with HK$15 billion of assets.
“The economy will be poor. People will sell cars and avoid maintenance costs,” said Lai.
The number of parking spots changing hands fell drastically in the second half of the year, from a peak of 1,348 in June to just 377 in November, the lowest for almost three years, according to Land Registry data compiled by Hong Kong Property agency.
The parking space market is likely to move in tandem with the broader property market, said Richard Lee, chief executive of Hong Kong Property.
“The overall [property] market has been downbeat as buyers expect home prices to drop, so investment sentiment has been dampened. Investors in parking space will [also] adopt a wait-and-see attitude,” he said.
“Existing demand for parking spaces has probably been satisfied. The market is not likely to be very much affected by extra demand [in the short term].”
But some observers are more optimistic. The price of parking spaces, particularly those in urban areas, will continue to rise in the next six months to a year because of an undersupply, said Ringo Lee, president of the Hong Kong Automobile Association, who owns a car and a parking space.
“Demand has been increasing. Every year, there are more than 40,000 new cars on the road,” he said. “This year, the number of private cars has grown to about 560,000 but the number of parking spaces has been decreasing. A lot of government car parks have been demolished.
“Every car needs about 1.8 parking spaces. I need an extra parking space at work, apart from the one at home, for example.”
Lee said he has had to postpone his own plans to buy more cars because of the lack of parking bays.
Despite the recent slowdown, 2018 is on course to be a record year for parking space transactions in terms of the money changing hands. The transaction volume reached HK$15.95 billion in November and will be close to HK$17 billion at year-end, according to Centaline Property Agency.
“It will break last year’s record of HK$16.13 billion and mark a new historical high,” said Wong Leung-sing, senior associate director of research at Centaline.
The number of transactions reached 8,654 last month and is forecast to surpass 9,000 at the end of the year.
The Met Blossom development in Ma On Shan saw the highest number of transactions, with 43 parking spaces changing hands for a total of HK$70.65 million this year.
Analysts attributed the craze, which only emerged in recent years, to a surge in interest from investors after the government imposed a number of cooling measures on residential property transactions.
“From an investment perspective, transactions of parking spaces are subject to fewer restrictions,” said James Siu, deputy managing director at Savills. “The unit price of parking spaces is also lower.”
In June a new world record was set when a space sold for HK$6 million at Sun Hung Kai Properties’ luxury Ultima development in Ho Man Tin. The buyers forked out HK$44,444 per square foot for the space, handing the Hong Kong couple who had bought it nine months earlier a quick HK$2.6 million profit.
The Mei Foo Sun Chuen housing estate in Kowloon has seen one of the steepest climbs in the cost of parking bays. The average prices of a space there rose 11.7 per cent from HK$1.41 million in January to HK$1.57 million in December, according to Land Registry data compiled by Carparkhk.com. Its peak in October, at HK$1.78 million, was almost a third higher than a year earlier.