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 curbs to cool the housing market amid worries of overheating following the latest round of monetary stimulus in the U.S. last month.

 

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.

 

Because Hong Kong's currency is pegged to the U.S. dollar, policymakers cannot take conventional measures to cool property prices like raising interest rates.

 

So the government tightened restrictions on property purchases, including bringing in a new stamp duty on foreign buyers. But parking spots and other non-residential property are exempt.

 

"The latest overseas buyers' stamp duty will just put some fuel onto that fire, and is making the whole parking space investment market go out of control," said Josh Wong, whose Hong Kong City Parking owns about 200 parking spots at eight lots around Hong Kong. read more

 

Many investors who buy spaces rent them out to car owners. Wong said he typically looks for an annual yield, or return, of 5 to 6 percent, but because prices have risen, yields have been falling to about 4 to 5 percent. He said has even heard of investors making as little as 1.8 percent on their investment.

 

Wong, who also runs Parkinghk.com, a website for buyers and sellers of parking spots, said the market was heating up because investors didn't need a lot of money to get started.

 

"One million Hong Kong dollars (US$129,000) cannot buy anything in Hong Kong. You cannot buy a shop, you cannot buy anything except car parking and that would help the car park investment go even more crazy," he said.