The guide to investing in car parking spaces

Investing in car spaces feature

Could a parking space be the lucrative property investment opportunity you’ve been looking for?

A concrete slab of maybe a dozen square metres might not sound like an attractive investment property, but it’s becoming an option increasingly worth considering for Australian investors. In busy capital cities like Sydney, Melbourne and Brisbane, convenient car parking spaces are at an absolute premium and some people are willing to pay a substantial amount of money to rent out a parking space close to where they work or live.

To take advantage of this situation, some savvy investors have started purchasing inner-city parking spaces as investments, renting them out to motorists to earn income and also looking forward to potential capital gains.

In fact, in early 2016, one Sydney investor made headlines when he listed a CBD car space for sale for $400,000 – money that would be more than enough to buy a house in some parts of Australia.

Why invest in car spaces?

Supply and demand is a crucial factor that affects the worth of any investment. In Australia’s major capital cities, the demand for car parking outstrips supply. This is especially the case in Sydney and Melbourne, where city councils are restricting the number of parking spaces available in an effort to reduce traffic congestion, and car lanes are being replaced by bicycle lanes. At the same time, the development of multi-storey city car parks is becoming a thing of the past.

So while more people are living and working in our capital cities than ever before, they have fewer and fewer spaces to park their vehicles. According to data from Colliers International and Parking & Traffic Consultants, the Sydney and Melbourne CBDs have the lowest ratios of car spaces to workers at 12.2 and 14.2 car spaces per 100 workers respectively.

Lacking car spaces graphic

The Sydney CBD also has one of the world’s highest median daily parking rates at $70.85 a day, while Brisbane ($69.03) and Melbourne ($63.61) are not much better.

With this in mind, it’s easy to see why car spaces represent an alternative investment opportunity. Many of them are strata-titled and for sale in busy CBD locations, as well as close to busy precincts such as airports and sporting grounds.

Not only do they have the potential to generate a surprisingly large rental income, but with an ever-decreasing number of car parks set to become available in future years, they could easily become highly sought-after pieces of real estate.

They’re also a relatively hands-off investment – once you have a suitable “tenant” in place you can just set and forget – unlike residential property, which requires ongoing management by you or a property agent.

Where are car parks in demand?

To get a clearer picture of the potential rental returns on offer from parking spaces in Australia’s capital cities, we searched the rental listings on Parkhound. The results of our search are shown in the table below:

StateSuburb (postcode)Listings availableMonthly rent
NSWSydney (2000)101$187-$770
VictoriaMelbourne (3000)294$181-$1,099
QueenslandBrisbane (4000)77$165-$953

As you can imagine, prices vary widely depending on the type of space and where it is located in each suburb. Ease of access to the site also has an influence on the monthly rent charged.

For example, while a secure, undercover park on Essex St, The Rocks is listed for $572 a month, a secure underground park in Surry Hills is available for $360.

Buying a car space

If you like the potential returns a car space has to offer as an investment, the next thing to look at is how much a space costs to purchase. A quick search on findacarpark.com.au shows seven car spaces for sale in Sydney, ranging from $39,000 in Camperdown to $400,000 for a two-car space on the CBD’s Bond St. In Melbourne, prices for the 27 spaces listed range from $12,000 for a spot in St Kilda to $57,500 for an underground park on Exhibition St.

However, as a general guide, $40,000 to $60,000 should get you a space in the CBD of many Australian capital cities. Data from findacarpark.com.au in 2014 reveals that the average cost of a car space in Melbourne is just over $50,000, with an average rental yield of 8%.

Buying a car park is undoubtedly one of the cheapest ways to buy property in a capital city, which means some investors may have the capital needed to purchase a space outright. If you need to borrow funds, however, some lenders classify car parks as specialised property. This means the lender sees them as posing a higher level of risk, so the LVR may be as low as 50% and you may also need to contend with a higher interest rate.

If you do need a loan to purchase a car parking space, speak to your mortgage broker to find out what finance options are available.

Where to find spaces

Commercial Real Estate lists car spaces for sale across Australia and at the time of writing had 38 listings. findacarpark.com.au also allows you to browse spaces for sale and for lease; all you have to do is enter your desired suburb or postcode and start searching.

Some real estate agents also specialise in listing and selling parking spaces, so make Google your friend if you’re looking for a suitable car park investment.

Risks to consider

Before you decide whether buying a parking space is right for you, remember that there are risks involved. For one thing, there’s always a chance that a new development is constructed near your space and parking becomes more readily available. There’s also a risk that you may not see the capital growth you had hoped for, so buying as close as possible to the CBD is the best bet to maximise returns.

Before you buy, make sure you’re fully aware of all the costs associated with managing the space. For example, you may need to pay rates to the local council or, depending on where the spot is located, strata fees. These can quickly add up and negate any return on your investment.

Finally, it’s also worth pointing out that parking space levies and congestion charges apply in both Sydney and Melbourne. Sydney’s parking space levy applies to any residential and non-residential off-street space used or reserved for a motor vehicle. It’s $2,350 in the City of Sydney, North Sydney and Milsons Point, but drops to $840 in Bondi Junction, Chatswood, Parramatta and St Leonards. Down in Melbourne, the congestion levy is set at $1,360 for category 1 areas (including the CBD) and $960 for category 2 areas.

As governments around the country continue to search for new sources of funding, there is a risk that these levies may rise, or the areas to which they apply may expand.

Tips and tricks

  • Listing your space. Once you have a parking space, you can list it on websites like Parking Australia and Parkhound, which allow drivers to search thousands of parking spaces for lease across Australia. Parkhound, for example, has more than 8,900 members who have earned a total of $5,105,874 from renting out their car space. It’s free to list your space for rent on the Parkhound website.
  • Before you buy. If you’re buying an apartment with a parking space attached and you’re contemplating renting or selling the space at a later date, make sure you do your research first. The space could be on the same title or a separate title, while the owners’ corporation rules may stipulate that it can only be rented or sold to residents of the same building.
  • Limited capital growth. One other issue to be aware of is that while car spaces do provide the potential to generate good cash flow, they don’t offer the same potential for capital growth as some other investments. While house prices in capital cities can experience boom periods of substantial growth, the same can’t really be said for parking spots. After all, demand for housing is likely always going to outstrip demand for parking.

Compare investment loans from across the market

Rates last updated July 23rd, 2018
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.99%
3.99%
$0
$0 p.a.
80%
Get $1,000 cash into a USaver account when you apply for a loan of $200,000 or more (new or refinance). Terms and conditions apply. Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.89%
4.32%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
4.27%
4.32%
$445
$0 p.a.
85%
Variable investment loan with 100% offset account. Face-to-face consultations available for NSW and ACT customers.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
3.88%
3.88%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate with a 30% deposit. 100% online application process.
3.79%
3.80%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
4.79%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available with a 10% deposit. Available in QLD, NSW and ACT only.
3.89%
3.92%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.04%
4.08%
$600
$0 p.a.
80%
Enjoy a competitive interest rate with no ongoing fee.
4.29%
4.55%
$0
$0 p.a.
90%
An investment mortgage with a high maximum borrowing amount. Available with a 10% deposit.
4.14%
4.14%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.60%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.09%
4.12%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.29%
3.88%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.14%
4.17%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.19%
4.20%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender..
3.99%
4.02%
$0
$0 p.a.
80%
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
4.19%
3.87%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
4.11%
3.83%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate mortgage for investing.

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2 Responses

  1. Default Gravatar
    JulieJune 20, 2018

    I’m looking at investing in buying car parking spaces in Melbourne what do I have to do or go to to find out places where in Melbourne and how much And is it worth it
    Thank you cheers I don’t want to rent them want to buy them
    Cheers

    • finder Customer Care
      JeniJune 21, 2018Staff

      Hi Julie,

      Thank you for getting in touch with finder.

      If you need to know where to buy car parking space in Melbourne, you may check online by going to some pages like findacarpark.com.au or contact a real estate company around Melbourne to scout places that sell parking spaces.

      As per this page, $40,000 to $60,000 should get you a space in the CBD of many Australian capital cities. Data from findacarpark.com.au in 2014 reveals that the average cost of a car space in Melbourne is just over $50,000, with an average rental yield of 8%.

      You may also want to read more on parking locations and fees in Melbourne on this page.

      I hope this helps. Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

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