Nestled within Hong Kong's dense skyscraper jungle, a $640,000
property sits among some of the world's most expensive commercial and
residential spaces.
The price might sound like a steal.
This Asian financial capital has the world's priciest property,
according to Savills. Since the start of 2010, average Hong Kong home
prices have doubled. But the price tag mentioned here is neither for a
home nor an office.
It is for a parking space: A slab of
undecorated concrete, stained by black motor oil, about
8-feet-by-16-feet in size. Price per square foot: nearly $5,000. Jacinto
Tong has owned and used this space for the past ten years. Described in
local media as "the tycoon of parking spaces," he is effusive when
talking about
this particular "priceless" gem.
"I think this is
the best car park space I ever had," said the CEO of Gale Well Group, a
property firm that owns hundreds of residential and commercial spaces
across the city. "You can go straight to the office and the elevator.
Only 20 steps - 20 steps!"
The CEO does not own just one $640,000
parking space. Tong owns two. If he were to sell he could bank $1.3
million. "People don't mind paying more," boasted Tong. "But I'm not
eager to sell." And yet that is the reality for Hong Kong.
According
to the latest Parking Rate Survey by Colliers International, the global
property services firm, this city has the most exorbitant monthly
parking fees in the Asia-Pacific. Hong Kong's monthly median parking
rate was $744.72 in 2011. With less than a dollar's difference, Tokyo
came in as Asia's number two.
The reason for Hong Kong's pricey
parking rates is rooted in governmental curbs on the city's residential
market, said Buggle Lau, chief analyst at Midland Realty, one of the
city's largest real estate companies.
Many analysts believe Hong
Kong's property market is a bubble waiting to burst. To deflate it
slowly, the government has introduced a series of increasingly stringent
policies since November 2010. These have made it more expensive for
investors to buy or flip homes for a quick profit.
The
regulations have produced desired results, said Lau, leading to a 31%
fall in home sale transactions over the past 23 months. But, as a side
effect, the squeeze on residential investors has pushed them into
commercial property, like parking spaces, which have no such price curbs
yet.
While homes sale transaction volumes have fallen since
November 2010, trade in parking spaces has risen more than 25%, Lau
added. The volume of industrial, commercial and retail have surged 16%
as well. Fast price rises and higher yields on leased parking spaces
have attracted more investors to this niche market.
"If you look
at this year's (total sales) number, it's the highest in the past ten
years or so," Lau said. "Through November of this year, Hong Kong had
car park transactions totaling $751 million. In 2010, it was $525
million." This rise marks an increase of 43% so far this year. Tong, the
parking space tycoon, breaks down rental yields by property category.
"The
lowest yield of all property is (retail) shops, maybe less than 2%. The
second thing is commercial, which is about 2% to 2.5%, and then
residential which is about 3%. Parking spaces should be about 5%."
Hence, some of Hong Kong's hottest investment vehicles are where people
keep their motorized ones.
But Lau, the property analyst,
cautions against casual investment in parking spaces. If Hong Kong's
economy stalls the first thing people will get rid of will be their
cars. No car means no need for a parking space. But a home will always
have a use. "If you buy a parking space," said Lau, "you can't live in
it."
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