Investors looking for new places to park their cash in Hong Kong are driving up prices for parking spaces, sparking fears of a bubble in the Asian financial centre.
Prices for parking spots in Hong Kong are nearing historic highs, the side effect of government curbs to cool the housing market amid worries of overheating following the latest round of monetary stimulus in the U.S. last month.
There are "a lot of speculators in the market, especially for car parks," said Buggle Lau, senior analyst with Midland Realty. A bubble is "definitely forming."
Last weekend, a developer sold about 500 parking spots at a new suburban apartment complex at prices of up to 1.3 million Hong Kong dollars ($167,000) per space.
In a commercial building near the city's financial district on Hong Kong Island, an investor has put 34 parking spaces on sale for $100 million HK ($12.9 million), according to a report last week in the Ming Pao newspaper. A parking spot in the exclusive Repulse Bay neighbourhood sold for $3 million HK, the paper also said, citing Land Registry data.
On Thursday, a single parking spot in a building in the popular Mid-Levels residential neighbourhood will be auctioned off with the opening bid at $680,000 HK.
Second-hand parking spaces changed hands in the third quarter for an average of $640,000 HK. That's up 16.4 per cent over the year before, according to research by property company Centaline. It's also not far off the record $660,000 HK in the fourth quarter of 1997, shortly before the city's property market collapsed.
Parking - and other real estate - in Hong Kong is expensive because both steep hills and past government policy to keep land supply tight means there is limited space to build on. Car-ownership levels are relatively low, but so are the number of parking spaces. The city has 443,442 private cars and 479,000 private parking spaces, according to government data.
Parking prices are now rival-ing housing prices. A three-bedroom, 1,030-square-foot apartment at the new Festival City development in Tai Wai district, where the 500 parking spots went on sale, was sold earlier this month for $8 million HK, or $7,767 HK per square foot. Based on a typical size of 150 square feet, the $1.3-million HK parking spot would cost $8,667 HK per square foot.
The rising prices are a side effect of recent measures to cool Hong Kong's housing prices, which have doubled since the end of 2009 and are among the highest in the world.
Hong Kong's government has introduced three separate sets of measures since the summer aimed at cooling the market, including speeding up the release of more affordable housing and tightening mortgage requirements. The latest measures announced in October include a new tax on foreigners and higher stamp duty on investors flipping properties.
They come in response to efforts by U.S. policymakers to stimulate the American economy by keeping interest rates low. Hong Kong leaders are worried that investors turned off by U.S. investments with unattractive interest rates will pour their money into the southern Chinese city, pushing asset prices higher as investors chase profits in the property market.
The latest curbs don't cover non-residential properties such as parking spots, so investors have been piling in as they look for higher returns. Hong Kong had the world's third-highest monthly parking charges last year, according to real estate company Colliers International.
"In some car parks, especially in urban areas where supply is limited, the sales price of some car parks can be as high as two to three million [Hong Kong] dollars" each, said Lau of Midland Realty.
Because Hong Kong's currency is pegged to the U.S. dollar, policymakers cannot take conventional measures to cool property prices like raising interest rates. So the government tightened restrictions on property purchases, including bringing in a new stamp duty on foreign buyers. But parking spots and other non-residential property are exempt.
