“He's got the good spot, in front of the good building, in the good neighbourhood and he's not gonna wanna move.”
– Seinfeld’s George Costanza describing the importance of his father’s lucrative parking spot.
Anyone who has spent the day in one of Australia’s capital cities understands the stress and frustration often associated with trying to find a car parking space.
After circling around and around, and yes, around again, most of us give up and are forced to pay exorbitant fees at a parking garage.
While this may be annoying as drivers, the flip side is that as investors, it can be quite lucrative.
The result of a growing work force in Australian capital cities means opportunities to park can be scarce, and with some workers paying up to $65 per day for a space, there is certainly a market for investors.
According to a recent report published by Colliers International, Sydney is the worst place for CBD parking with just 11.4 spaces per 100 workers, second was Melbourne with 13.4 spaces per 100 workers.
Source: Colliers International
The good news for investors, who want to buy property through their SMSF or who may not have a great deal of capital, is that many of these parking spaces are strata-titled anf for sale – including those at major airports.
Managing director of Findapark Francis Armstrong, said the low price and good return is proving enticing to investors.
“The appeal is low barrier to entry, and there no other property assets at this price,” she said.
Cost and return
The cost of these types of investments can vary, depending on the city, from about $32,000 in Adelaide
to around $67,000 in Sydney. The gross rental yield also varies, depending on your location, from 6% in NSW to about 13% in WA.
Cost of investment per state (CBD and inner suburbs):
- NSW $67,000
- VIC $45,600
- QLD $41,200
- WA $38,420
- SA $32,700
Rental yield per state (based on current values)
- NSW 6%
- VIC 9%
- QLD 13%
- SA 11%
- WA 13%
Average monthly rental rates drivers pay per state:
- NSW $350.25
- VIC $337.89
- QLD $435.68
- SA $289.67
- WA $420.00
- ACT $278.00
The most important thing to consider when deciding on an investment like this is – is there reasonable capital growth to make it worthwhile?
According to Eddie Chung, partner, tax and advisory, property and construction at BDO (QLD) Pty Ltd, to achieve such growth, the car space would generally need to be as close to a CBD as possible where car spaces are scarce.
“The flip side is if car spaces suddenly become more readily available around the area, if a new building is constructed around your car park which offers plenty of car spaces, then the value of your car space may stagnate or even go backwards,” he said.
Another risk to consider is if a car space provides a good yield, but does not appreciate in value, the income will generally be taxable - as opposed to any capital gain only being triggered if the car space is sold, unless you are negative gearing.
Chung said there is also a risk of incurring tax on structure expenses.
“This may differ between each state and territory, but local governments may tax car space owners via rates and water charges.
“It will be advisable for a potential investor to make the necessary enquiries to fully understand these costs before buying the car park. If the car park is marketed by a real estate agent, ask them for a full disclosure of the costs involved. They are required to be forthcoming with the information; otherwise, they risk misrepresenting the sale over which the buyer may have future recourse.”
Where to buy?
If you think investing in strata-titled car parking spaces is for you, there are a number of ways to proceed. There are many specialised companies throughout Australia that offer a service that matches vendors with buyers.
Often major airports also sell their strata-titled car parks. In NSW, you can purchase car spaces at Sydney Airport in the Park & Fly car park area for about $57,000 and offering a 6.5% rental yield.
Can you afford to buy in this suburb? Find out how much you can borrow