Parking the cash

Underground potential spotted

Many Hongkongers who ‘dream’ of owning their own home believe that it will remain a dream following a tripling of house prices over the past decade. Only this month, a buyer paid HK$5.26 million ($674,000) for a tiny 598 square foot flat in one of Kowloon’s housing blocks. It set a new record in that district. Average earnings in the city are $29,880 per annum.

One solution: the Chinese government has been trying to encourage Hong Kong residents to consider buying a flat in the Greater Bay Area (GBA) instead – as part of its grand blueprint to integrate them into the nine-interlinked mainland cities (plus Macau).

However, in key GBA cities an apartment is increasingly unaffordable for many middle-class Hongkongers too. So property agents have come up with a new property-related investment idea for the GBA instead: parking spaces.

Hong Kong Commercial Daily reported last month that the average price for a car parking lot in Guangzhou’s Baiyun area is Rmb350,000 ($50,928). That is up from Rmb200,000 in 2016.

Cao Jingchang, chairman of the Guangdong-Hong Kong-Macau Economic & Trade Association, believes that prices could rise to Rmb500,000 in prime areas of the GBA within the next two years.

Cao is also the founder of real estate investment firm Vision Property, which plans to invest up to Rmb1.2 billion to acquire 10,000 car parking spaces by the end of next year. The initial investments will be in Guangzhou and Foshan, before expanding to Zhuhai and the rest of the GBA.

According to Cao, the average rents for car parking spaces in Guangzhou are about Rmb800 to Rmb1,200 per month, yielding a rental return of 2.7%. In Foshan they are about 50% cheaper, around the Rmb400 to Rmb700 mark.

Most of the residential projects built in the 1990s don’t come with a car park (the passenger car market only really took off in the 2000s). As a result there has been an undersupply of parking space, especially in southern Chinese cities. For instance, there are nearly two million registered vehicles in Foshan but there are only about 350,000 parking lots in the city.

According to the Hong Kong Commercial Daily, the ratio of car parking spaces to residential units in the GBA is typically about 0.8 (ie 80 spaces for every 100 homes). However, the average number of cars per household in Guangzhou is 1.5.

Meanwhile the demand for parking lots has also been stoked by local traffic police’s increasingly stringent crackdown on illegal parking.

Cao advises that investors steer clear of buying parking spaces at apartment blocks close to subway lines and watch out for the small print (some spaces can only be owned for a fixed period of time by an individual).

However, for the most part the whole process of buying a car parking space is bureaucracy-lite and there are plenty of agencies in Hong Kong willing to do the job for prospective owners.

So far this year, car sales across the whole country have not been healthy, falling 9.3%. However, the electric vehicle sector continues to forge ahead. In June, sales were up 72% year-on-year and now account for 6.3% of all sales. Investors can net higher returns if they are prepared to install electric vehicle charging points at their parking space. This outlay costs betweenRmb12,000 and Rmb18,000. But installation is fairly straightforward as owners simply need to apply to the power supply bureau for permission.

One Chinese-Australian reader of WiC reader says car parking spaces in the GBA sound far more lucrative than the ones she has purchased in Sydney’s central business district, where returns are undermined by “high council levies”.

China currently imposes a 3% deed tax at the time of purchasing the spaces. But unlike residential units – i.e. apartments – there are no restrictions on overseas buyers acquiring one or more of them.

“I think this investment could be appealing to a broader range of investors,” the WiC reader says. “There are fewer levies to worry about and it would be a good alternative for those who can’t afford to buy a crazy expensive apartment! Less maintenance too.”

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