Hong Kong’s lucrative parking space market has almost ground to a halt as the combined impact of last year’s social unrest and the coronavirus pandemic have battered the local economy, analysts said.
Sales of residential parking bays slipped to a five-month low, plunging 65.6 per cent to 205 transactions in February from the previous month, data from Centaline Property showed. The total value of parking spaces changing hands fell 76.2 per cent to HK$352 million (US$45.2 million).
Deals involving new parking bays took the biggest hit, tanking by 90 per cent as developers held back supply at their new projects.
Buying parking spots as an investment – generating returns by renting them out or selling at an appreciated value – has essentially dried up, said Wong Leung-sing, senior associate director of research at Centaline.
“Investment sentiment has been gloomy for longer than expected but there is still some demand from buyers who are actual car owners,” he said.
Investment activity in the wider real estate market has slowed since last year’s social unrest, the onset of a technical recession and the current coronavirus pandemic.
The second-hand parking space market has been hovering around 170 deals in each of the last four months. In February, 163 parking units changed hands, worth a total of HK$239 million.
Sales should stay around that level until the broader property market finds an upturn, Wong said.
Despite the protest movement that started in June, the average price of a second-hand parking bay still surged 27 per cent to HK$1.93 million in 2019 from HK$1.52 million the previous year, Centaline said in a January report.
However, the same trajectory for an average 134 sq ft (12.4 square metre) spot may not be sustained this year because of the downbeat real estate outlook.
“Car parking spot prices have always been high, not just because investors speculate on them, but also since there is a tight supply of units to meet the demand. In previous years, the economy was doing better and people could afford to buy cars and parking spaces, which exacerbated the shortage,” Wong said.
The performance of the parking space market moves in tandem with the general economy, said Dorothy Chow, senior director of valuation advisory services at JLL in Hong Kong. She said yields on car parking spots are down to around 2 to 3 per cent.
As Hong Kong’s economy might take a while to recover even after the coronavirus crisis ends, people will tend to cut unnecessary expenses such as owning a private car or parking space, Chow explained.
“In light of the economic outlook, I do not foresee the price of car parking spaces skyrocketing as they once did,” she said. While overall sales declined, there have been some eye-catching transactions. A parking unit at Ultima in Ho Man Tin was sold for HK$6.38 million in February, bringing its owner a handsome 35.7 per cent gain in less than a year, according to property agency Midland Realty.
Late last year, a space at The Center office tower in Hong Kong’s financial core was sold for an eye-watering HK$7.6 million – nearly US$1 million.
First-hand deals plunged nearly 90 per cent in February from a month prior to just 42 deals totalling of HK$112 million.
“Property developers have slowed down the launch of residential parking units, which explains the lull in the first-hand market,” Wong said. Most parking spaces in new housing complexes are held by developers who determine when to draw lots among homeowners bidding for a space.
Developer CK Asset Holdings decided in January to suspend the sale of parking spaces at its Ocean Pride apartment complex in Tsuen Wan as a social-distancing measure to contain the coronavirus.
By region, Hong Kong Island recorded the least amount of deals – just 37 transactions with a total value of HK$68 million. In Kowloon there were 54 deals totalling HK$126 million, while in the New Territories 114 spots changed hands for HK$157 million.
Car park prices in Hong Kong have outperformed the housing market over the last dozen years, as the city continues to struggle with tight land supply in an era of ultra-low interest rates.
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