Friday, November 30, 2012

No Wonder Their Cars Are So Small!

Via Bloomberg Businessweek, "Investors reacting to the Hong Kong government’s campaign to curb home-buying in the world’s most expensive market are shifting money into parking spaces, pushing up prices that in high-end neighborhoods can match the cost of two U.S. homes. The average price of a previously owned parking spot in residential complexes rose 6.7 percent to US$82,600 in the third quarter, the second highest on record, from the prior three months. A space in the exclusive Repulse Bay area sold in May for US$387,000, the most for a single transaction and more than double the median U.S. home price, according to CarparkHK.com, a website that tallies parking-spot information. “There’s just too much liquidity in the market,” said Simon Lo, at property broker Colliers International. “The government has set up a firewall for residential properties, but all this money still needs to find a place.” Most parking spaces in Hong Kong, including those inside residential complexes, are freely transferable with separate ownership titles from the apartments. Hong Kong banks normally lend a maximum 50% of a parking space’s value, compared with 70% for residential properties. A parking space at Lohas Park, a middle- to low-end residential project in the city’s northeast, sold for HK$910,000. The space is being leased for HK$3,300 a month, equating to a yield of about 4.4 percent. By contrast, a 900-square-foot apartment in the same project is being sold for HK$5.18 million. With a monthly rental of HK$15,000, the yield is around 3.5 percent. There were more than 8,300 parking space transactions in Hong Kong in the first 10 months of this year, accounting for 8.9 percent of all property deals. That percentage is the highest since records were first kept in 1997. “The numbers suggest there’s a negative correlation between parking spaces and homes,” said Buggle Lau, chief analyst at Midland. “The taxes have driven investors away from buying apartments.” Borrowing costs in Hong Kong are almost at record lows because the Hong Kong dollar’s peg to the U.S. currency ties monetary policy to the Federal Reserve’s even as the economy is driven by China’s growth. The city’s biggest lenders charge an average 2.15 percent on home loans, below the city’s inflation rate of 3.8 percent. “At this interest rate nobody wants to leave their money in the bank,” said Wong Leung-sing. “When you try and stop people from investing in homes they have to find something else."