Hong Kong's plan to add more car parks won't resolve shortage, exorbitant prices of spaces in near term analysts warn

By Martin Choi martin.choi@scmp.com / https://www.scmp.com/business/article/3095861/governments-plan-add-more-car-parks-wont-resolve-shortage-exorbitant?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3095861 | August 5, 2020 10:04 AM SGT
A government plan to increase the supply of car parking space in Hong Kong would do little to resolve the chronic shortage that supports their eye-watering prices in the near term, analysts said.
The new proposals include building new car parks on land designated for "government, institution or community" use or open space, and carrying out a review of parking provisions laid out in guidelines with a view to adding more spaces, according to the Transport Advisory Committee.
The government is pursuing a host of short and medium- to long-term measures to increase car parking spaces to catch up with market demand, it added.
The provision of parking bays in Hong Kong has lagged far behind the uptake of cars over the years, resulting in a huge imbalance between supply and demand. A parking space at The Center, an upmarket 73-storey office tower, changed hands last October for HK$7.6 million (US$969,000), making it the most expensive spot on earth to park a vehicle.
The proposed revisions of parking standards by the Transport Department would "increase the provision of private car parking spaces in future private and subsidised housing developments as well as the provision of commercial vehicle parking spaces in subsidised housing estates," it said in a July 28 statement.
However, analysts said the new government plans would take time to implement and would not bring about a drop in the famously exorbitant prices of parking bays in the short term.
"We expect that the new government plans will not result in a decline in prices in the short- to medium-term," said Dorothy Chow, senior director of valuation at JLL in Hong Kong.
"It usually takes some years for the government to formulate, implement and enforce its new policies. A lot of coordination work among government departments as well as studies for formulating the new standards would be needed.
"We believe, given the time to be taken for these studies and coordination within the government, the short- to medium-term shortage of car parking spaces could not be resolved."
According to statistics from the Transport Department compiled by JLL, the number of private vehicles, including vans, has grown 37 per cent from 457,000 in 2010 to 625,000 in 2020.
On the other hand, the number of parking spaces in the same decade has grown by only about 8 per cent, according to JLL.
"The fast-paced growth in the number of vehicles will continue outnumbering the increment of car parking space provision in the near future," said Chow.
The government had not specified the amount of new parking spaces to be added, nor the actual schedule for the plan to be implemented - more reasons to believe it will not ease prices in the short term, according to Wong Leung-sing, senior associate director of research at Centaline.
With the economy crippled by the Covid-19 outbreak, sales of residential parking bays in the first half of this year plunged 20 per cent to 1,920 transactions from the same period last year, the lowest level in 14 years, data from Centaline Property showed. The total value of parking spaces changing hands fell 31.4 per cent to HK$3.7 billion, a four-year low.
"Due to the impact of the pandemic, developers suspended sales of new properties and slowed the launch of first-hand parking spaces, leading to a significant drop in parking bay registrations," said Wong. "Sales of owned parking spaces have also been downbeat as a result of the coronavirus outbreak."
Second-hand parking bay sales in the first half of the year slumped 28 per cent to 1,300 transactions, from the same period last year, according to JLL.
"On the whole, the overall price of car parking spaces has been on a downward trend. Recently, the sales of car parking spaces [at a loss] in The Belcher's and Kingswood Villas are cases in point," said Anson Lam, manager of the valuation department at JLL in Hong Kong.
A parking bay at The Belcher's in Pok Fu Lam was recently sold for HK$2.8 million, a loss of HK$300,000. It was previously bought for HK$3.1 million back in October 2014.
In Tin Shui Wai's Kingswood Villa, a car parking space was recently sold for HK$1.22 million at a loss of HK$230,000. The previous owner bought it for HK$1.45 million back in 2018.
Car park prices in Hong Kong have outperformed the housing market over the last dozen years, as the city continues to struggle with tight land supply in an era of ultra-low interest rates.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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