It might not be too early to mention a possible new real estate sector, even though it may not yet be a common occurrence. What are these strange but very-much-invested places? Parking spots.
Investors now turning to parking spots as real estate investment
In Hong Kong, where home prices are exorbitantly high and home sizes are incredulously small, parking spots have become the big next investment opportunity. Some could call it a fad, but perhaps not as more investors are putting money into these small spaces and as car ownership surge.
And the pace and margin of growth of these lots are nothing small at all. One investor who bought 2 parking spaces in a dimly-lit carpark in a residential building in the outskirts of the city, have purportedly seen its value double in just 18 months.
From HK$730,000 the value has grown to HK$1.6 million (S$2772,000). The growth of 100% in just the span of a year is apparently not uncommon.
Gains in parking spots investment surpass that of residential properties
Prices of condominiums and apartments in Hong Kong are already sky-high, which means while there is still growth, the margins are increasingly narrower. Parking spaces, on the other hand, are a relatively new property-investment concept and gains have grown in leaps and bounds, far surpassing that of residential properties.
Private home prices in Hong Kong have doubled in the last 7 years or so. Prices of parking spaces have tripled at the same time. As of last year, the average price of a parking space is HK$1.4 million.
In crowded cities such as Sydney, renting a parking space in the city centre is not unheard of, but making that much money out of a small 134 sq ft space is quite something else.
In Hong Kong, recent news revealed that the size of new flats in the New Territories will be almost that of a parking space.
This nano-flat will start from 128 sq ft. An average of 510 units per year will be rolled out between 2017 and 2020. Considering the average first-time buyers can afford properties costing under HK$6 million (US$769,000) which would only allow get them a sizeable flat in an old housing estate (over 30-years-old) in urban areas, this new investment opportunity seems like a good way to make use of their monies.
Will this phenomenon seed in Singapore and if so, how will that impact our property market and economy?