Investors reacting to the Hong Kong government’s campaign to curb home buying in the world’s most expensive market are shifting money into parking spaces, pushing up prices that in high-end neighborhoods can match the cost of two U.S. homes.

 

A space in the exclusive Repulse Bay area sold in May for HK$3 million (US$387,000), the most for a single transaction and more than double the median U.S. home price, according to CarparkHK.com, a website that tallies parking-spot information.

 

Most parking spaces in Hong Kong, including those inside residential complexes, are freely transferable with separate ownership titles from the apartments, which operates 10 parking garages in the city. Even so, some garages have rules prohibiting nonresidents from entering and parking on the premises, which lowers the leasing options available to the owners, said City Parking Chief Executive Officer Josh Wong. read more

 

Spaces in industrial and commercial buildings also are transferable, though landlords at most prime-office and shopping locations normally hold on to parking spaces to benefit from the stable rental returns they provide, said Wong.

 

“The circumstances are providing a perfect combination for a bubble in parking spaces,” he said. “There are demand-supply imbalances in some districts and the banks are pushing for the mortgage business.”

 

While realtors post listings of parking spaces for sale and charge fees on deals, few brokers specialize in them because the margin is too small. Most buyers go to websites such as CarparkHK.com or ParkingHK.com

 

The HK$3 million paid for the parking space in Repulse Bay, a residential district that’s home to some of the city’s richest people, including billionaire Cheng Yu-tung, is the highest on record, according to data compiled by CarparkHK.com, which also sells advertisement space for auto-related products.

 

Average yield for a parking space has fallen to as low as 4 percent in some districts from more than 5 percent two years ago and may decline to around 3 percent next year “if the frenzy persists,” said City Parking’s Wong.

 

Hong Kong, with 7.1 million people and a vast public- transport network, including subways, buses, ferries and trains, has one of the lowest car ownership rates among developed countries, with 56 cars per 1,000 people, according to World Bank statistics in 2011. That compares to 439 in the U.S. and 101 in Singapore.

 

After Leung, a former property surveyor, imposed a 15 percent tax on non-local and corporate homebuyers and raised a resale tax on Oct. 26, 68 parking spaces changed hands in the next seven days, rising to 207 spaces in the week ending Nov. 16, compared with 33 recorded in the week before the announcement, according to figures compiled by CarparkHK.com. That’s the most transactions in a week since the website began collecting such data in February 2011.

 

‘Another Push’

“We have already seen investment going from properties to parking ever since” the government first imposed an extra tax on property transactions in 2010, said City Parking’s Wong.

 
“The latest set of measures just gave it another push.”

The government won’t rule out introducing measures to prevent a bubble from forming in the nonresidential market, Financial Secretary John Tsang wrote on his blog on Nov. 4.