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There can be several drivers to buy a car park space, but if you’re thinking of buying as an investor, it makes sense to take a good look at the pros and cons.
Why buy a car park space?
It’s amazing to think that some of the most affordable real estate in our big cities isn’t a unit or even a studio apartment. Often, it can be a car park space – just a few squares metres of concrete.
Obviously, you can’t live in a car park space. However, there can be several reasons why people can be tempted to buy one.
If you work in a CBD location, owning a car park space can be a way of ensuring you always have a secure parking spot available for the workday commute.
Buying a car park space can also be a way of enjoying the convenience and security of off-street parking if you live in a neighbourhood with limited street parking, or if ‘home’ is an apartment that doesn’t come with parking, which can be the case with some older unit blocks.
A car park space can also be an investment in its own right – one that has the potential to deliver healthy cash flow and very little maintenance. After all, you’re unlikely to get a call from the tenant on a Sunday complaining that the hot water heater has just broken down.
How much do car park spaces sell for?
Car park spaces can be found listed for sale on commercial property sites, private online classifieds such as Gumtree or on dedicated websites like Findacarpark.
Just like homes, prices are based on size and location. As a guide, single car spots on the fringe of the Sydney CBD can be advertised for about $40,000, while others in the heart of the city centre may be listed for almost 10 times that amount.
Ongoing costs of a car park space
If you’re thinking of buying a car park space, it’s important to understand the ongoing costs you’ll be expected to pay. These can include strata levies and council rates. By way of example, a car space in Sydney’s eastern suburbs, which sold for $225,000, was advertised as having strata levies of $209.60 per quarter, and council rates of $188.90 per quarter. It could also be a good idea to find out if there are any tax implications, and you might want to consider seeking advice from a suitably qualified professional.
Can a car park space be a good investment?
As with all property investments, how much you can earn as an investor will vary widely. A 13sq m car park space in Melbourne listed for sale for $33,000 in September 2021, for instance, was described by Commercial Real Estate as having the potential to be leased for $300 a month. That could work out to a return of about 11% before ongoing costs. However, it’s worth stressing that this is one example. You really need to crunch the numbers for any car park space you’re thinking of buying. As with any piece of real estate, research the area to be confident it’s in a high-demand location.
The impact of COVID-19 on car park spaces
Research in 2015 found the future of car park spaces in Australia’s CBD areas looked bright. City workforce and resident populations were increasing, which supported demand, and car park spaces were delivering healthy cash flows with low outgoing expenses.
However, the Coronavirus pandemic has changed many things – and demand for car park spaces could be one of them.
Demand for parking, especially around tourist precincts and airports, has been heavily impacted during lockdowns. Looking ahead, it’s hard to predict exactly how demand for car parking in these areas – and around employment hubs – will fare.
Research by the Australian Institute of Family Studies found 67% of employed Australians are sometimes or always working from home, compared with 42% pre-COVID. According to a study by Infrastructure Victoria, if work-from-home levels remain constant throughout the pandemic, commuter travel to Melbourne’s CBD could drop by up to 90%. On the flipside, the same report said health concerns could see a 55% drop in public transport use, which could translate to more people driving to city centres for work and leisure.
The upshot is that the future of car park spaces is hard to pinpoint. The pandemic won’t last forever, but it could change some of our commuting habits over the longer term.
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