Parking Your Investment

In a continuously shrinking world, arguments are made for carpark investments as real estate alternatives.全球增長放緩，車位買賣漸成另類投資。

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Real estate alternatives to apartments, villas and offices have been on investor radars for several years, including assets such as self-storage facilities and data centres as homes in an urbanising world continue to shrink, and the digital economy entrenches itself. And despite a global trend towards driverless cars and services like Lyft that don't require cars to be parked for later use, Dr. Stephen Shum, principal consultant, V+ Property Expo, believes there's a future in carpark investment. Specialising in the Greater China area, Shum probably has a point; the Hong Kong couple that sold their space for over US$600,000 are living proof there's opportunity in carparking.

There's a lot to recommend carparks as an investment. First and foremost, the initial financial outlay is relatively low, ideal for novice investors and those dabbling in the China market for the first time. “Parking space investment is recommended for getting started because investing in parking spaces requires a less steep learning curve,” begins Shum. Familiarity with individual buildings—demographics, income levels, auto ownership statistics—can help investors make informed choices, and even better, “investment in parking spaces does not require cumbersome procedures. For individual investors with fewer assets or a lack of experience, carpark investment is an easy step to take.”

Procedures are precisely what can make investment in the mainland tricky for newcomers and veteran investors alike; rules and regulations can change overnight. Like most other asset classes, the carpark submarket in China is its own unique beast. Everything from district infrastructure to traffic conditions impact carpark investments, as do vastly different habits among Hong Kong, North American, European and Chinese drivers—the latter of which are easier to predict according to Shum. The Chinese penchant for purchasing property also makes it a rental and secondhand sales market.

“Hong Kong parking spaces are expensive, the threshold for investing in Hong Kong is high and there is little room for appreciation. On the other hand, domestic parking space [investment] is just getting started in China,” explains Shum. Greater Bay Area (GBA) locations such as Zhuhai and Foshan have seen property prices double in recent years, but the same hasn't happened in carparks; the submarket is in its infancy. With limited knowledge of the potential for carpark investment in cities where cars are a necessity and the car-to-parking lot ratio is roughly half, now is the time to invest. “On average, every family has at least one car, and the demand for parking is quite high. At present, most vehicles can be parked on the street. As the Chinese government promotes the integration of the GBA with the international community, local security and city appearances are gradually being rectified. The number of illegal parking is reducing and the demand for regular parking spaces is increasing.” Domestic regulations require 30 parking spaces for every 100 homes but less than 10% of developments are hitting those targets. “The supply of domestic parking spaces is seriously lacking,” says Shum.

Basic supply-demand imbalances also equate to strong, consistent yields. Parking rental yields can reach 3% in China on a HK$200,000 investment, besting Hong Kong's (approximate) 2% in flats and 1% in parking, and capital appreciation is optimistic. With mortgage restrictions for Hongkongers, high interest rates and an increasing investment threshold on traditional assets, Shum argues, “parking spaces are the only option for those intending to invest in domestic industries at a low cost.”

But what about data centres and storage facilities, both high on investor wishlists and both primed for future growth—unlike cars, which, some would argue, are on their way to obsolescence? For starters, Shum points out the complicated management and leasing arrangements for something like self-storage, and pricey security and power demands for data centres, something more suited to institutional investors than individuals. Assets like student housing—a rising investment star—involve property management, the potential for tenant defaults and regular maintenance costs that eat into yields.

Finally, as for cars going the way of the dinosaur, Shum sees parking spaces building in flexibility—future-proofing—the way most developments must in 2018. Value is already there, but the inherent complexity of property transfers in China underpins the appeal of parking spaces. Multiple parking space purchases means selected assets can be allocated when needed without sacrificing the entire investment, as well as increased portfolio diversity. Electric cars need to be charged, and when there are more of them, “the demand for parking spaces will rise. The impact of driverless cars is the same, especially when driverless cars need to input accurate parking positions into their operating systems. Demand will increase, and the parking space can become a place for charging or waiting for passengers,” theorises Shum.

Since the central government's decision not to regulate parking rents in 2015, carpark spaces have been eligible for sale to thirdparty purchasers, and land premiums can be paid to retain property rights. The Chinese carpark market is essentially open for business. Finishes Shum: “It's worthy of long-term investment.”