The cost of car parking spaces in new apartment projects in some Chinese cities is soaring as developers roll out their latest secret weapon to counter home price caps imposed by municipal authorities.
As if contending with sky-high homes prices wasn`t enough, some buyers are now forced to fork out as much as 1 million yuan ($151, 821) for car parking spaces in major second-tier cities, such as Tianjin, Xiamen, Hangzhou, Nanjing and Suzhou. They are sold with an apartment worth as little as 2.4 million yuan, in bundled deals that make it compulsory for residents to purchase the parking space.
"There`s a price cap on apartments, but not on parking spaces, so we`re bundle-selling them with apartments to compensate," said a Shanghai-based developer who declined to be identified due to the sensitivity of the issue.
"Recently we sold parking spaces in Xiamen for over 1 million yuan each. Last year one only cost less than 200,000," he said, referring to spaces in the port city in Fujian province in southeastern China.
To fend off speculators and defuse a housing bubble, major cities across China have slapped a series of restrictions on property markets, including imposing limits on developers` selling prices.
That`s prompted property companies to find ways to ride out the tightening measures or skirt them, including delaying the launch of new home sales in the hope that when authorities relax some rules, buyers will jump back into the market and they can release more supply at higher prices.
Top-tier cities such as Shanghai and Beijing have seen a surge in car park prices in the past three to five years, with some asking prices over one million yuan, mostly due to a massive shortage. But second-tier cities are catching up in the past year, and this time driven by bundle-selling, property agents said.
As China’s car park marketplace is not active and transparent, it is unclear exactly how much average prices have gained in different cities in the past few years.
"In almost every city with a price cap policy in place, if they allow developers to bundle-sell car park spaces, it is happening," said Clement Luk, the CEO for eastern China at realtor Centaline. "In the past, in cities like Nanjing and Suzhou, many car park spaces were below 100,000 yuan, but now many cost over 300,000. Is this a natural price appreciation? Definitely not."
He said the bundling had been adopted to skirt price cap policies and manipulate selling prices.
Authorities in Hangzhou, Nanjing and Tianjin did not reply to emails for comment. Officials in Xiamen and Suzhou could not be reached by email or phone.
Shimao Property, a higher-end developer based in Shanghai, said at an earnings conference on Tuesday that when it is seeking a pre-sales permit for a development it does ask the authorities concerned if it can raise some prices for renovation costs and car parking spaces, said Vice President Jason Hui. He noted it was much easier to get permission to do this in tier two cities than in the biggest ones.
In Xiamen, the bundle-selling strategy has also had an impact on general car park prices. According to the city`s official housing website, a high-end project by China Vanke, the country`s No. 2 developer, was selling a car park space for as much as 750,000 yuan, while state-backed Poly Real Estate was selling spaces for 500,000 yuan bundled with smaller apartments.
Vanke said the project concerned, Huxin Island, does not involve bundling and home buyers are not forced to acquire a parking space. “The pricing of the car parks is set according to market, we’ve followed through the approval process accordingly,” a company spokesman said.
Poly could not be reached for comment.
A property sales manager in Tianjin told Reuters the price of car park spaces in the port city in prime locations had jumped to more than 350,000 yuan - from around 100,000 yuan- this year and some developers there were also bundle-selling.
A woman surnamed Tian, who doesn`t own a car, told Reuters she bought an apartment last month in the second-tier city of Hangzhou for 3.4 million yuan. She had no choice but to pay an additional 500,000 yuan for a parking space.
"The sales person said I could only buy an apartment if I also bought a car park space, otherwise it`s impossible," said Tian, who declined to give her full name due to the sensitivity of the issue. She also declined to give the name of the developer.
"Of course I think bundle-selling is not reasonable, but what can I do? There`s a shortage of apartments; developers are the boss."
Tian said she may buy a car or would consider sub-letting or selling the space if that was an option.
In China, a developer may only sell parking spaces to home owners of the residential development, and many have strict rules to keep non-tenants out of a development, limiting the prospects of sub-letting for home buyers, property agents said.
Bundling has already caught the attention of Shanghai authorities. Officials in the commercial capital announced measures in late July to prohibit the practice, ordering developers to stop forcing buyers to purchase a car parking space with an apartment.
"Governments in the first-tier cities have stepped in to stop this loophole, I think other cities will follow suit eventually," said Luk from Centaline.
($1 = 6.5867 Chinese yuan renminbi)