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The Latest Bubble: Hong Kong Parking Space Sells For Double Average US Home Price

Tyler Durden's picture




 

After recently selling the most expensive per-square-foot residential property in the world recently, the liquidity slooshing around the world has been modestly stymied by Hong Kong's curbs on home-buying in the world's most expensive market. But there is always a greater fool to sell to, right? So, that Fed-sponsored liquidity has found a new yield-grabbing spot - parking spaces! Average HK parking space prices have started to surge (up 6.7% in Q3) to its second highest on record and as Bloomberg Businessweek notes, a parking space in the exclusive Repulse Bay are sold for $387,000 (yes, that's a place to park your car; and no, it doesn't come with a happy ending) - double the average US home price! "There's just too much liquidity in the market," said Simon Lo, Hong Kong-based executive director of research and advisory 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." Once again we are reminded of the Fed mantra - repeat in monotone: 'there is no inflation and money-printing has no adverse effect'.

 

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 HK$640,000 ($82,600) in the third quarter, the second highest on record, from the prior three months, according to Centaline Property Agency Ltd. A space in the exclusive Repulse Bay area sold in May for HK$3 million ($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.

 

Hong Kong Chief Executive Leung Chun-ying has unveiled three major sets of curbs on home buying since taking over in July, amid concerns that continued U.S. stimulus would attract more funds into the city and fuel an asset bubble. Apartment prices in the city doubled in almost four years, driven by near record-low interest rates and an influx of money from China.

 

“There’s just too much liquidity in the market,” said Simon Lo, Hong Kong-based executive director of research and advisory 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.”

 

Spaces Transferable

 

Home prices gained 4.4 percent in the third quarter...

 

Most parking spaces in Hong Kong, including those inside residential complexes, are freely transferable with separate ownership titles from the apartments, according to Hong Kong City Parking, which operates 10 parking garages in the city. Even so, some garages have rules prohibiting nonresidents from entering and parking on the premises, which lowers the leasing options available to the owners, said City Parking Chief Executive Officer Josh Wong.

 

Spaces in industrial and commercial buildings also are transferable...

 

“The circumstances are providing a perfect combination for a bubble in parking spaces,” he said. “There are demand-supply imbalances in some districts and the banks are pushing for the mortgage business.”

 

‘Less Resilient’

 

Hong Kong banks normally lend a maximum 50 percent of a parking space’s value, compared with 70 percent for residential properties, according to Kenneth Tsin, head of property loans at Bank of East Asia Ltd. (23) Parking-space mortgages are riskier for banks compared with residential- and commercial-property mortgages, Tsin said.

 

“They are relatively less marketable than flats and shops, while their values are also less resilient than those of housing prices,” he said.

 

Developers often sell the spaces independently from the residential units...

 

Easier Investment

 

“All these measures make buying apartments so much riskier,” said Yeung, who plans to lease the space for HK$3,000 a month. “Parking spaces are a much easier and simpler investment, plus you don’t need too much capital. If things in the apartment market don’t change, I’ll probably stick with this for a while.”

 

A parking space at Lohas Park, a middle- to low-end residential project in the city’s northeast, sold for HK$910,000, Centaline said Nov. 4. 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, according to Centaline. With a monthly rental of HK$15,000, the yield is around 3.5 percent.

 

Falling Yield

 

The record for average parking-spot prices is HK$660,000, set in the fourth quarter of 1997, just before the city’s last major real estate crash.

 

...

 

Average yield for a parking space has fallen to as low as 4 percent in some districts from more than 5 percent two years ago and may decline to around 3 percent next year “if the frenzy persists,” said City Parking’s Wong.

 

...

 

‘Another Push’

 

“We have already seen investment going from properties to parking ever since” the government first imposed an extra tax on property transactions in 2010, said City Parking’s Wong. “The latest set of measures just gave it another push.”

 

The government won’t rule out introducing measures to prevent a bubble from forming in the nonresidential market, Financial Secretary John Tsang wrote on his blog on Nov. 4.

 

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, real estate broker Midland Holdings Ltd. (1200) said. That percentage is the highest since records were first kept in 1997.

 

‘Negative Correlation’

 

“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 such as HSBC Holdings Plc and Standard Chartered Plc 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, an associate director of research at Centaline. “When you try and stop people from investing in homes they have to find something else. Shops and offices are probably too expensive for most retail investors. Car spaces are the best alternative for them.”

 

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Thu, 11/29/2012 - 22:22 | 3022604 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

There is no inflation....

Thu, 11/29/2012 - 22:30 | 3022629 Eireann go Brach
Eireann go Brach's picture

Who Flung Dung said Wing Chung?

Thu, 11/29/2012 - 22:53 | 3022659 soopy
soopy's picture

Kill yourself.

Fri, 11/30/2012 - 07:05 | 3023060 bdc63
bdc63's picture

I'm usually quick to jump on the snarky comments bandwagon here on ZH, but  have to say that I don't think this is that big of a deal.  I've been to Repulse Bay in HK, and it doesn't surprize me at all that someone there would pay that for something like a parking spot.

Thu, 11/29/2012 - 22:38 | 3022636 ACP
ACP's picture

Hey, you can't add housing/parking spot prices into the inflation number, because if you do, it will make inflation look as bad as it really is.

Thu, 11/29/2012 - 22:22 | 3022605 reader2010
reader2010's picture

Where do I get insurance for a park space?

Thu, 11/29/2012 - 22:27 | 3022622 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Blythe Masters will sell you some.

Thu, 11/29/2012 - 22:30 | 3022627 reader2010
reader2010's picture

Scratch that. Just checked the FHA guildelines and it looks like their price is too high.

Thu, 11/29/2012 - 22:25 | 3022611 gwar5
gwar5's picture

SWEET! That will solve the traffic problem.

 

 

Thu, 11/29/2012 - 22:25 | 3022612 LetThemEatRand
LetThemEatRand's picture

But if you compare these prices to the PRE-bubble pop in U.S. home prices, it doesn't seem so bad.  I'm sure Bloomberg could generate a chart that would reflect how reasonable it is.   And I'm also sure that no one is banking the profit in real assets somewhere that the tax man does not cometh.

Thu, 11/29/2012 - 22:30 | 3022613 LongSoupLine
LongSoupLine's picture

looks like the Bernank has a little Sun Tzu in him after all.

export that inflation you fucking tool.

Thu, 11/29/2012 - 22:28 | 3022619 toomanyfakecons...
toomanyfakeconservatives's picture

China cracks me up. They have 40 automobiles for every 1000 people, and they're about as rare as a Yeti in the countryside.

Thu, 11/29/2012 - 23:05 | 3022680 john39
john39's picture

been to shanghai recently? obviously not.

Fri, 11/30/2012 - 10:16 | 3023384 Lebensphilosoph
Lebensphilosoph's picture

So you were given the propaganda tour by the Glorious Democratic Government of the People's Republic of China too?

Thu, 11/29/2012 - 22:28 | 3022624 Insideher Trading
Insideher Trading's picture

Excessive liquidity creates excessive stupidity!!!

wogga, wogga, wogga

Fri, 11/30/2012 - 00:57 | 3022837 XitSam
XitSam's picture

Where can I buy some Colateralized Hong Kong Parking Space Debt Obligations?  Only the AAA rated upper tranches please.

Fri, 11/30/2012 - 07:58 | 3023109 Seer
Seer's picture

That's fucking funny!

Thu, 11/29/2012 - 22:44 | 3022649 Boilermaker
Boilermaker's picture

Holy Fuck!!!

Hong Kong parking spots are ridiculous expensive?!?!?

OMFG.  We're doomed.

Phew, for a moment, I thought this would be a sensationalized story.  Glad it's not. 

Thu, 11/29/2012 - 22:49 | 3022653 Glass Seagull
Glass Seagull's picture

Wealthy Chinese looking to make the "great escape."  Hong Kong is sooooo Vancouver right now.

 

 

Thu, 11/29/2012 - 22:54 | 3022662 chump666
chump666's picture

I know a HK person that had a reasonable income and was offered a "grant" from the goverment to buy property.  Asia is going to blow apart in an inflation infused sh*storm.  The Asian's namely the Chinese and HK have been also buying up USD forwards to cover their crap currencies.  Singapore being a light in the dumb-ass policies is actually concerned about inflation.

The world is f*cked, I just trade it.

Thu, 11/29/2012 - 23:06 | 3022683 Larry Dallas
Larry Dallas's picture

This just in. John Paulsen is long HK Parking Spots.

Cue Muddy Waters...

Thu, 11/29/2012 - 23:07 | 3022684 infinity8
infinity8's picture

"Repulse Bay"?!? I'm repulsed, that's for certain. Hello, Sanity. I miss you. I really, really miss you. What'll it take to get you back?

Fri, 11/30/2012 - 01:30 | 3022839 williambanzai7
williambanzai7's picture

There is a reason why Repulse Bay is sought by the wealthy, including all the expat Banksters from you know where. It is perched between a mountain slope and a beach and if you look at a picture of it you will see that there is literally zero street parking. Since the American School is located there all the bankster expats want to live there and for them the cost of renting spaces is the company's problem. Until recently, expat rentals literally drove the real estate market.

These are not the kind of people who ride buses to work with the help so I'm not surprised that this is happening. Cars in HK are not a necessity and the public transportation system is one of the best in the world.

Fri, 11/30/2012 - 01:32 | 3022880 Lord Koos
Lord Koos's picture

"Too much liquidity in the market"  

-- Doesn't that just mean there are too many people with too much money?

Fri, 11/30/2012 - 08:09 | 3023122 Seer
Seer's picture

Chasing too few goods...

Fri, 11/30/2012 - 04:39 | 3022964 Floodmaster
Floodmaster's picture

Best Places To Live Top Lists should always include "for Multimillionaire's" ,for the common people, they are the worst places on earth.

Fri, 11/30/2012 - 06:51 | 3022977 NuYawkFrankie
NuYawkFrankie's picture

Seems something got lost in translation.

 

Maybe someone ought to explain to those crazy Chinks that the expression Parking Your Money is just a figure of speech - and not to be taken literally....

Fri, 11/30/2012 - 06:52 | 3023047 Coldfire
Coldfire's picture

Bermonkey,

Fuck you very much.

Sincerely,

Hong Kong

Fri, 11/30/2012 - 10:38 | 3023455 Downtoolong
Downtoolong's picture

I'll trade you my parking space for your new Ferrari. We need a new word now, for things beyond absurd. Then we can keep talking about the Fed too. 

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