Hong Kong has the highest real-estate prices in the world on many counts. Recently, the city's richest man, Li Ka-shing, made himself a little richer by selling The Center, a skyscraper that's not even in the center of town, at a record price for an office building, ever, anywhere in the world.
The Center, in Sheung Wan, fetched HK$40.2 billion ($5.2 billion) in a sale to a mainland Chinese consortium, and will now, bizarrely, be sold off strata title to become an office ghetto.
But perhaps nothing says success in Hong Kong quite like having somewhere to park your four wheels. It's phenomenally expensive to park in Hong Kong, where it's not unusual to pay HK$45 ($5.77) to sit your car in an office basement for 60 minutes, or in fact any fraction thereof. Stay 61 minutes, and you're paying HK$90 ($11.50).
A parking space in June sold for a world record HK$5.18 million ($660,000) at the new residential tower The Upton. The buyer, construction tycoon Kwan Wai-ming, had already spent HK$75.6 million ($9.7 million) for two apartments at the residential tower in Sai Ying Pun, a suburban neighborhood on Hong Kong island, and another HK$7.76 million ($1 million) for his previous two car-park spaces there.
In fact, the entry price for a parking space in Hong Kong is now HK$1 million ($128,000), and even "average" spaces in central parts of town sell for double that - meaning the $250,000 space costs about as much as a home in Chicago, New Orleans or Virginia Beach.
This situation shows little sign of easing. In the last decade, the number of cars on the Hong Kong roads has risen 48%, or 189,281 new vehicles. But the number of private-car parking spaces rose by only 9%, or 54,520 spots.
This has caused prices for car-park spaces to race ahead of residential rates. There were 1.50 car-park spots per vehicle in 2006; that ratio is now at 1.1, meaning almost every spot in the city is full -- and the ratio continues its steady decline.
Mizuho Securities (MFG) analyst Alan Jin has crunched the numbers on three popular and representative housing estates in Hong Kong to figure out the extent of that gap. By his calculations, parking space prices have risen an average of 167% in the six years through the third quarter of 2017.
That compares with a 52% increase in the price of an apartment at those three blocks: Provident Garden in North Point on northern Hong Kong island; Mei Foo Sun Chuen in Lai Chi Kok on the Kowloon peninsula; and Island Harbourview in Tai Kok Tsui, next to the Kowloon neighborhood of Mong Kok, the most-crowded place to live in the world in terms of people per square foot.
Some people who have been priced out of Hong Kong's insanely expensive residential real estate may be investing in car parking spaces in a bid to get on the ladder. It's not a crazy idea, but Jin notes that he believes this only applies to a fraction of the market.
No, the bulk of the spaces are bought by rich people looking to park their luxury sedan. The stream of traffic here normally yields Mercedes, BMW, Lexus, Tesla, Mercedes, BMW, repeat. The city is the top-selling market for Rolls-Royce (RYCEY) .
The rising price of parking lots likely represents a window on rising income inequality in the financial capital of greater China. The number of households with monthly incomes of more than HK$80,000 rose by 110% over the last six years, while the number of those earning HK$40,000 to HK$49,000 increased by 47%.
"The robust and steady growth in private car ownership reflects genuine demand from the fast-growing high-income groups, rather than substitution demand from those who have been priced out of the housing market," Jin says. He maintains a "constructive view on the housing market in Hong Kong."
Mizuho has buy ratings on Sun Hung Kai Properties (SUHJY) , which specializes in higher-end apartments; Kerry Properties (KRYPY) , another luxury developer; Henderson Land (HLDCY) , which is more mass-market; and an underperform on luxury-focused, green-thinking developer Sino Land (SNLAY) .
A lot of smart money in Hong Kong shifted from residential real estate to other sectors once the government here started slapping higher stamp duties and mortgage restrictions on apartments. Industrial, warehouse and shop space has all seen a rapid run-up, as a spillover from world-record residential and office rates.
Causeway Bay again ranked as the most-expensive retail space in Asia, in rankings released by Cushman & Wakefield on Wednesday. Rents have been correcting slightly, a process likely to complete by the end of the year, the commercial brokerage states. But despite a 4.7% fall, a square foot in a corner of a store will still cost you $2,725 to rent.
That's second only to Fifth Avenue in New York, where the same amount of space averages $3,000 per year. New Bond Street in London rounds out the top three at a bargain $1,720 per square foot per year. Rents were steady in NYC, but rose by one-third in London in the last year, as Europe's recovery from the economic crisis picks up pace and the pound provides post-Brexit bargains.
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