Safe as car parks? Hong Kong parking spaces outperform home prices over twelve year period
Prices for Hong Kong car parks have outperformed the housing market over the last dozen years, amid shrinking supply and a buoyant market ready to bid up real estate themes in the era of ultra low interest rates.
“Strong request and rising investment interest will proceed to boost prices for car parking spaces,” said Dorothy Chow, a regional director of valuation advisory services at JLL
Underscoring the heated market, Hong Kong took the No one spot globally for car parks last week when a Hong Kong executive paid a record HK$Five.Legitimate million for a one hundred eighty eight square foot space at the Upton development in Sai Ying Pun.
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From an average of HK$396,000 in 2005, car park spaces have risen two hundred seventy per cent to HK$1.47 million in April, after touching a record of HK$1.51 million in March, according to data provided from JLL.
During the same period, prices for secondary homes rose two hundred fifty six per cent to 327.Four points, up from ninety two in 2005, according to the Rating and Valuation Department’s home price index.
Chow attributed the rising prices to a shortage of car parks.
Three government public car parks, the Tsuen Wan Transport Sophisticated Car Park, the Middle Road Multi-storey Car Park in Tsimshatsui and Murray Road Car Park in Central have been closed for redevelopment into commercial and residential projects. Since 2013, the city has lost 1,888 car parking spaces owing to switching land use.
Another factor weighing on supply can be traced to switches of the floor area exemption policy in April 2011. Following the switch, car parking spaces need to be placed below ground level in order to get total exemption from gross floor area calculations.
Chow said construction cost for a car park with basis completing is about HK$1,000 per square foot above ground, but doubles to HK$Two,000 per sq ft if underground.
“It will increase development cost. More importantly, there is no requirement in the land lease to build car parking spaces for redevelopment projects. Developers choose not to provide parking spaces,” she said.
For the very first five months this year prices for car parking spaces have edged up twelve per cent to an average of HK$1.46 million, she said. A total Three,013 car parking lots have switched forearms for a total transaction value of HK$Four.Three billion during the period.
Victor Lui, deputy managing director at Sun Dangled Kai Properties, said parking spaces are a major concern for luxury home buyers.
“It is common for them to own two cars. That explains the rapid rise in parking lot prices. Investors also see upside potential in the sector,” he said.