My last post looked at the question of how much carparks cost to build. This one looks at the other side of the equation: what is their value on completion? The answer being, of course, whatever people are willing to pay for them.

In my apartment building, the going rate for a carpark is around $50 a week, which doesn’t seem to have changed much in the four years I’ve been here. That works out to a gross income for the carpark owner of $2,600 a year, if they choose to rent it out. However, we apartment dwellers are a transient bunch, and in a given year there are probably going to be a couple of weeks (minimum) where no one’s paying rent on the parking space. So call it $2,500 a year.

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Looking at Trade Me listings for carparks in the Auckland CBD, this level of rent seems pretty common. Most of the carparks available are listed for $50-$65 a week, although it’s a fairly small sample I’m looking at. Auckland Transport has monthly parks available for up to around $80 a week, or more if you want to pay for the privilege of having a particular space rather than just the right to use one anywhere in the building. Even then, you’re not supposed to use it to store your car in all day (no “24/7 garaging option”).

You’d have to deduct your expenses from the gross rent you receive: the carpark would bump up your rates bill slightly, and presumably it would also add to your body corporate charges. I’m going to assume these costs are around $200 a year, for a net income of $2,300 a year. For a commercial operator like Auckland Transport or Wilson, GST would also need to be deducted, as well as staffing and security costs, and a whole bunch of other costs. For a private individual, speaking from experience here, you might want to deduct something for the ‘hassle factor’ of finding new people to rent the carpark, making sure their payment goes in every week and so on.

Back to my building, though. The value of this carpark as an investment depends on the “yield” you apply to it – that is, what kind of rate of return you want to get on your investment. I’m not sure what the prevailing yields are for apartment carparks, but let’s say they’re 8% – I’m probably being generous here, especially for my building where it’s leasehold and leaky, with water dripping through into the basement carpark.

At an 8% yield, this carpark is worth $2,300 divided by 8%, or $28,750. At a 10% yield, it would only be worth $23,000. Either way, that’s significantly less than what it would have cost to build. My building has two levels of basement car parking, and today it would cost around $50,000 to build each of those carparks.

For the market value of my carpark to be $50,000, it would have to be sold at a 4.6% yield, and I don’t think we’re seeing those kinds of figures in the Auckland market.

So, what we have in my building is carparks which are now worth much less on the open market than it cost to build them. And this doesn’t seem to be an unusual situation – for example, Bob Dey wrote an article back in 2007 on the Luna apartments, up the top of Symonds St, which had to build far more car parks than there was demand for, and couldn’t sell them all to the residents. The developer then tried to lease them out to offices in the area. Quoting Bob:

“The owners & occupiers of the apartment units only require or have purchased 141 carparking spaces of the 196 spaces that are available.” Burton said it had offered the remaining 55 spaces to the apartment owners & occupiers for lease or purchase, but they remained unused.

According to the council planning report, “The current allocation of parking spaces on site appears to adequately service the needs & requirements of the current occupiers & owners of the residential units. It is noted that the site is located relatively close to the cbd and is within walking distance of a number of services & facilities, including public transport systems. As such, the requirement for private vehicles in this area may not be as high as expected for such a residential development.”

Told the council’s traffic engineers said “If the residents hadn’t taken up parks they considered they weren’t required”, Cllr Graeme Mulholland commented: “There’s a big difference between taking up a carpark and taking up an offer to purchase at $45,000.”

On the other hand, I should note that the value of a carpark will depend on the location and even on the building itself. My building has got a pretty generous parking allocation, and at a guess I’d say it has around 1.5 per apartment, with many of them being tandem parks. A Herald article reports that CBD carparks can certainly sell for more than $50,000, and there’s obviously a real range of sale prices. Last year I was talking to a real estate agent at an open home – I think it was at The Beach apartments – and she mentioned apartments in that building which had a carpark were selling for $100,000 more than apartments without.

So, the upshot of all this is that carparks can be a lousy investment, or if the building in question has a limited supply, perhaps they’re not such a bad one.

Increasingly, developers are selling carparks as optional extras, rather than bundling them into the price of an apartment. This is a positive trend as far as I’m concerned: it gives buyers more flexibility, and comes closer to illustrating the true marginal cost of a carpark. For two examples, carparks in the new Merchant Quarter Condominiums are up for grabs for $35,000, including GST. At SugarTree, I saw them advertised for $60,000.

Of course, things like Minimum Parking Ratios can throw a spanner in the works – it’s harder for developers to sell carparks individually when they’re obligated to provide a certain number.

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  1. 4.6% return after all expenses have been deducted is probably about average return on an inner city apartment currently. It is hard to trash a car park so the risk of unexpected R&M is very low. Tandem parks are probably cheaper to build as no additional access road is needed for the second park. According to the 2013 census data, about 40% of households in Auckland Central East/West had a car. Harbourside it was 50% (more wealthy tenants)

    1. 4-5% yields might not be viewed as being too bad these days, and apartments have certainly been selling at fairly low yields in the last year or so. However, the market rent in my building doesn’t seem to have budged in the four years I’ve been living there. And that yield would have seemed pretty lousy in 2010.
      Actually, I’d kind of expected rents to go up when the on-street parking charges were changed a couple of years ago – up until that point, the parks along my street were free all weekend, and now it’s Sundays only. That made the on-street situation a lot less convenient for people who were driving to work Monday-Friday but wanted to have their car nearby during the weekend. That was when I switched to parking in the basement, and I imagine that some others did the same.

  2. You’ve just reminded me that I have an unused carpark sitting out the back of my apartment building in inner Melbourne. Why am I not renting it out?!

  3. You don’t have to move far out of the CBD however to areas such as Eden Terrace where apartments have been built with sometimes 2 carparks, to find it pretty difficult to rent out empty parking spaces. People simply park on the road for free, and if you’re lucky someone might rent one for $20 a week. Basically, there are a lot of unused parking spaces that cost a lot to build, meaning people are sitting on excessively large mortgages paying off things they don’t want, can’t use and were forced to own by the council. Seems like a ridiculous situation. If that’s not distorting the housing market and forcing people to waste more of their income on servicing large mortgages then I don’t know what is.

  4. 4-5% net yield on a residential carpark sounds about right in today’s market. Tandem carparks, although cheaper, aren’t very convenient for the users (unless you’re just storing your trailer or your weekend racer). Commercial carparks should yield around 7% with the tenant meeting the outgoings. Decoupling carparks from accommodation/office space would make a lot of sense, together with removal of minimums and maximums, ie let the market decide. Unfortunately, councils seem unable or unwilling to resist creating ever-increasing rules and regulations.

    1. The “market” has left Auckland with some very ugly apartments, and only looks very short term – as long as it takes to sell the apartment. The residents are left with the result for the next 50-100 years. Often buyers have been presented with great concept plans, and a very different reality, and no way to back out of the deal. If street parking ceases to exist, blocks without parking will become slums.

      1. I live in an apartment building with *absolutely no* off-street parking and very little on-street parking. Last month I went to auction to try and purchase the one bedroom apartment next to mine. I ended up losing the auction to a solicitor who paid $360k.

        Thanks for warning me that my wonderful apartment building is – in reality – just a fancy-pants, expensive slum-to-be. Do you also think my neighbours are likely to be criminals? I mean people living in slums-to-be must be more likely to be criminals right?

        Goodness I never realised that for the last 10 years of my life I’ve beenn living in a slum-to-be next to criminals-to-be …

        1. Dont worry about it. Our area had a few older dudes wearing ankle bracelets after all the finance companies collapsed.

    2. yes, minimum parking requirements are an unfortunate example of how a technical planning rule can undermine every strategic policy objective the Auckland Council has dreamed up. Here’s hoping someone in the AC planning department decides to act soon – before the pungent stench of lost socio-economic welfare becomes too overwhelming.


  5. The rate sounds alright if you keep the current Auckland real estate value in your mind but do we offer that kind of business or work opportunities to compare with current housing rates?

  6. So John, what you’re saying is that 1) in the presence of a public policy that requires an increase in the supply of offstreet parking (minimum parking requirements); 2) people’s willingness to pay for off-street parking is less than the costs of providing it, which in turn implies Auckland suffers from an oversupply of off-street parking.

    That there be a practical form of rocket science ;).

  7. It would work out worthwhile for an owner-occupier who has an apartment with a dedicated car space but doesn’t have a car of their own (more common than you might think). Might as well rent it out rather than leave it empty. Sometimes when you buy an apartment, you have to take the car park it comes with as it’s not always optional.

  8. Of course as a traffic engineer the market value to me is a bit different. I get paid to help people get dispensations from over the top parking rules. Of course I was very pleased to see in the Unitary Plan I still have a good business model, only now half the time it will be dispensations from parking maximums and dispensations from providing hundreds of bike racks! Great to see the Council still doesn’t base rules on actual data.

  9. Does anyone know how much it cost to rent a parking lot in sugar tree apartment akl. and what is the cost to purchase it

    1. Hi, last I heard they were selling carparks in stage 3 for $80,000. That’s the third building, which hasn’t begun construction yet. Carparks in the first stage, which is complete, originally sold for $60,000. But if you’re wanting to buy one off an existing owner, or rent one, it’ll be up to the two of you to agree on a price.

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