A record price of US$665,000 was reportedly paid for a single parking space in Upton residential complex car park, in Connaught Road West, Sai Ying Pun, near the CBD, on Hong Kong Island in April. Have prices gone crazy or the exuberance is rational?
With property prices already at eye-watering levels, an increasing number of investors have started to turn their interest towards individual car parking spaces where key demand drivers have been growing at a rapid rate — motorcycles and private car registrations have grown at a CAGR of 4.1 per cent since 2011.
The rush into the asset class has seen the average price of parking spaces in residential developments surge by 30% through the first eight months of this year.
But are parking spaces really a good investment?
Firstly, let us define what we mean by ‘good’. In my books, this should be an investment that both rises in value over time and enjoys positive carry — where the monthly incoming cash flow is greater than loan repayments and other costs associated with holding the property.