Rise in motorists raises demand for parking spaces as an investment in Hong Kong

Samson Ng is associate director, retail and investment division at Ricacorp Properties. He discussescar-parking spaces as an investment.

When it comes to investing in parking spaces in Hong Kong, what options are available?

You can buy from a developer or on the secondary market. Growing demand, allied to tightening measures on home purchases, have contributed to more people seeing parking spaces as a vehicle for investment. They are either bought for self-use or as a buy-to-let investment. To cater to such demand, more developers have released parking spaces in their [newbuild] developments for sale, especially in the New Territories, because of a sharp rise in car ownership. This type of parking space is usually limited to the property owners in the development owing to the ownership restrictions stipulated in the Deed of Mutual Covenant (DMC). That implies that, when you resell it, the new buyer has to be a resident of the development. Alternatively, you may buy a parking space from a corporate or individual owner in any managed car-parking facility. The buying and conveyancing procedures are similar to that of any other piece of real estate.

Is a parking space considered a good investment?

A sensible investment is one that generates consistent rental income or appreciates in value over time, preferably both. The plus points about investing in a parking lot include lower entry point relative to buying a home (given the punitive stamp duties). It is not management intensive, so should not require many repairs. Parking spaces do have risks. You would have to own a large number to generate substantial income. There is no guarantee that they will appreciate in value over time. If you are going to invest in one in a residential development, check the ratio of parking spaces to residential units. The higher the ratio, potentially the greater the demand and tighter supply relative to the number of car owners. Do check the existing supply and rental records of parking spaces in the neighbourhood.

How much does it cost to buy a lot? How much yield can I expect?

The cost of an individual space depends on location and time. A sought-after space in a prime residential location can sell for HK$3 million or more.It will cost HK$1 million to HK$1.2 million for a space in a large-scale housing development. An annual rental yield of 2 to 3 per cent is considered reasonable.

Can I get a mortgage to finance an investment?

Yes, you can get a loan-to-value ratio of 40 per cent, so you will need HK$600,000 as a deposit if you are purchasing a HK$1 million space, excluding agency, conveyancing fees and management fee deposit. Appraisals on the value of the space are relatively straightforward, so it should not be difficult to get a sufficient loan for it if you have a good credit rating and can pass the bank’s stress test.

Does one have to pay management fees?

Property management fees are a standard part of owning a space, just like owning a flat. These usually cover repairs to communal areas of the facility and the operating costs of the cashier’s office. The deposit is usually three month’s management fees.

Does ownership of a parking space in the building or development give me voting rights at owners meetings?

Maintenance and management fees, and the voting rights at owners’ meetings are determined by the undivided shares owned. You can check the DMC for the exact number of undivided shares allocated to the parking space(s) you own.

How can I rent out or sell my parking space?

You may rent it out through an estate agent or on your own. Note that some parking facilities are limited to the use of property owners within the development. So, check the DMC before you rent it out. Similarly, you may list it for sale via an agent. By the same token, check if it can be sold to an outsider or just residents of the building. In some cases, the parking space is required to be sold at the same time as the flat.