Homeowners are put in a tight spot when they want to buy car
A parking space at the luxurious Ultima estate cost a record HK$6 million
In Hong Kong, a city where it is almost impossible to buy a two-room apartment for less than HK$10 million (US$1.27 million), small is beautiful, and definitely profitable. So it should come as no surprise that a tiny carpark space in Kowloon has sold for a world-record price.
The patch of concrete at the luxurious Ultima housing estate in Ho Man Tin entered the Guinness Book of World Records after it fetched HK$6 million (US$764,654), the same price as a two-bedroom unit in City One Shatin, or a three-bedroom flat in Kingswood Villas. Both are located in the New Territories.
Based on a standard flat of 135 square feet, the sale works out at HK$44,000 (US$5,607) per square foot, which is about 40% higher than the sale price of HK$32,000 (US$4,078) for Sun Hung Kai Properties’ more expensive units. That is some parking space, and the story doesn’t end there.
The space was bought by its previous owner only in July last year for HK$3.4 million (US$433,307), which means they realised a sale profit of close to 80% in less than one year. That is probably a better return than the owner would have got from selling the unit itself.
There is obviously heavy demand, as the latest deal dwarfs the previous record of HK$5.18 million (US$660,180) for a spot at Upton, a high-end Sai Ying Pun residential complex, in June 2017. Another space that fits two cars was sold for HK$5 million (US$637,227).
As with everything else in Hong Kong, the price of car parking spaces is tied to the astronomical cost of land in the congested city, but it also reflects a surge in motor vehicle ownership: the number of licensed private cars rose 45% to 584,000 in 2016 from 402,000 in 2006. In this period the number of parking spaces rose just 9% to 662,000.
One option is to rent a space. According to a property agent, an Ultima car parking lot was recently leased for a monthly fee of HK$10,000 (US$1,274), giving a yield of about 2% for the owner.
That is about the same as the return on a bank fixed deposit, as expectation builds of a rate hike this month. The yield on luxury homes in Hong Kong is notoriously low, at only 1%.
Given the lucrative returns for car spots, it seems that another group of would-be unit buyers have been squeezed out of Hong Kong’s market. No longer will young people be able to live in a mini-van or truck because they can’t afford a home: they just ran out of space.