HONG KONG – 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 center.
Prices for parking spots in Hong Kong are nearing historic highs, the side effect of government actions to cool the housing market amid worries of overheating after 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.
On a weekend in late November, a developer sold about 500 parking spots at a new suburban apartment complex at prices of up to $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 $12.9 million, according to a report last month in the Ming Pao newspaper. A parking spot in the exclusive Repulse Bay neighborhood sold for $385,000, the paper also said, citing Land Registry data.
Last week, a single parking spot in a building in the popular Mid-Levels residential neighborhood was scheduled to be auctioned off with the opening bid at $87,000.
Secondhand parking spaces changed hands in the third quarter for an average of $82,000. That’s up 16.4 percent over the year before, according to research by property company Centaline. It’s also not far off the record $84,000 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 rivaling 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 last month for $1.02 million, or $997 per square foot. Based on a typical size of 150 square feet, the $167,000 parking spot would cost $1,113 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 taken three steps 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 unattractive U.S. 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 nonresidential properties such as parking spots, so investors have been piling in as they look for higher returns.