Concrete Analysis

Hong Kong car parking spaces now go for HK$1m

While dollar volumes for the industrial and commercial parking space market are smaller, its growth has outpaced that of residential parking

PUBLISHED : Wednesday, 05 August, 2015, 12:01am
UPDATED : Wednesday, 05 August, 2015, 4:36pm

Parking spaces in Hong Kong do not come cheap these days and price tags of more than HK$1 million are commonplace.

The charts show some macro 1997 to 2014 data on parking spaces, be they located in an industrial, commercial or residential property.

Note that transactions of whole parking complexes are excluded. The total transacted price tends to be small. In 2014, it was about HK$8.8 billion, having peaked in 1997 at HK$11 billion and reaching a bottom of HK$1.5 billion in 2002 (first chart).

Note that the total dollar volumes for industrial and commercial parking spaces tend to be smaller than those of residential, first or second-hand sectors. For instance, in 2014, the industrial and commercial parking space sectors totalled HK$500 million to HK$600 million each, whereas the first and second-hand residential space sectors reached between HK$3 billion to HK$4 billion each.

Second, dollar volumes can fluctuate immensely year to year - both the transaction volume and price level have been rising in recent years, thus leading to higher overall dollar volumes. However, on a year-to-year basis, the fluctuation in the total dollar volume could be immense (second chart).

Interesting to note is that while the dollar volumes for industrial and commercial parking spaces tend to be much smaller, their growth in dollar volume has outpaced that of residential, in particular second-hand residential parking spaces.

Thirdly, the average price of a second-hand residential parking space still lags behind the HK$1 million mark - its total dollar volume in 2014 is even smaller than that of 1997.

In the past couple of years, the average price paid for an industrial, commercial or new residential parking space has exceeded HK$1 million, and sometimes well above it.

Nonetheless, some transactions related to industrial or commercial parking space might at times contain more than one space, so caution is required when studying the data.

Investing in parking spaces offers some advantages over the usual property assets. First, the capital required is smaller; second, there are fewer building maintenance headaches; third, there are fewer potential complaints from tenants; and fourth, parking demand can be strong for popular locations.

Nonetheless, it is not free from risk either. The parking space sector can encounter economic downwinds, and quickly.

Stephen Chung is managing director of Zeppelin Real Estate Analysis