Why do they pay HK$2.7 million for a car parking space with no windows, no view, no walls?
Demand could drop amid expected economic downturn, experts warn
HK$2.7 million is enough to buy a small flat in an urban area, or a decent, two-bedroom unit in a district such as Fanling in the New Territories. But some buyers opt for a parking space. No windows, no view, no walls.
While home prices in the city continue to soften since hitting a peak in September, investors have been shifting their eyes to other asset classes, and that includes parking spaces, according to analysts.
Some buyers do not even own cars, but grab the spaces as investments, boosting the prices of car parking spaces in recent months.
A car parking space at Grand Austin, near the Austin MTR station, was sold for HK$2.46 million this week, a record for the estate.
On Saturday, a consortium of developers led by Sino Land launched 147 car parking spaces at The Hermitage residential project in West Kowloon at prices ranging from HK$2.3 million to HK$2.7 million. All were sold out on the first day of sale.
“Investing in office space needs a large lump sum. That makes some investors eye other investment targets such as car parking spaces,” said Thomas Lam, head of valuation and consultancy at Knight Frank.
Dorothy Chow, a regional director of valuation advisory services at JLL, said there was strong demand because of limited supply.
According to the Transport Department, there are about 683,000 parking spaces in Hong Kong, of which 198,000 are for public use and 485,000 are designated for private use in commercial, residential and industrial premises.
The total number is lower than the 779,329 registered vehicles – excluding franchised buses, public light buses and special purpose vehicles – last year, according to JLL.
Chow said it was risky for buyers to push prices of car parking spaces to such expensive levels.
According to an index produced by the Rating and Valuation Department, the average price of a car parking space rose 204 per cent from 2005 to 2015, while overall residential property prices rose 223 per cent in the same period. The average price of a car parking space rose from about HK$397,000 in 2005 to HK$1.2 million.
Demand could drop as Hong Kong was expected to face an economic downturn and a property slowdown, Chow said.
“If the economy turns sour, what will you first to dispose of? It will not be your home, but your car,” she said.
An increasing number of investment banks expect Hong Kong’s home prices will fall further, with UBS expecting prices to fall 10 per cent to 15 per cent this year and another 5 per cent to 10 per cent in 2017.
Financial Secretary John Tsang Chun-wah forecast earlier this month that Hong Kong’s economy would grow by 1 per cent to 2 per cent this year. That is a drop from last year’s 2.4 per cent growth and the 3.4 per cent average over the past decade.
Analysts said developers would put their car parking spaces up for sale to strengthen sales revenues amid a slowing residential market. Sino Land plans to sell 147 car parking spaces at The Dynasty in Tsuen Wan for HK$1.7 million each.