Inner city apartments have been steadily growing in popularity spurred by trends such as urbanisation and downsizing, with both investors and owner-occupiers looking for that perfect inner city haven. Still somewhat overlooked, Secret Agent believes quality apartments in the city are on occasion undervalued and parking is often an issue when buying, proving a deal-breaker.
When it comes to public transport options, the CBD is the most accessible place in Melbourne, however trains and trams do not run around the clock and the convenience of a car is simply irreplaceable. Many apartments for sale are advertised including a car space. What is a car spot tied to an apartment really worth? How much value does it add? And could/should you do without? Secret Agent went to investigate.
CAR PARKING STUDY – CBD
This study looked at over 300 sales over the past four years. One and two bedroom apartments from seven different apartment blocks in Melbourne’s CBD and Southbank were looked at to determine how much extra people are actually paying for an apartment with a car space. Apartments were included if information on the number of bedrooms, bathrooms and car parking was available, as well as the level on which the property was located. The statistics for Melbourne’s CBD also included location variables, to allow for differences in price depending on where the apartment block was located. The year and quarter the apartment was sold in was found to not have any significant impact on prices.
We found that a car space for a one or two bedroom apartment in Melbourne’s CBD and Southbank came at a premium between $37,900 (25 Wills Street) and $68,000 (620 Collins Street). On average, apartments with a car space sold for $53,700 more than ones without, 14.1% of the average one bedroom price ($380,000) and 9.86% of the average two bedroom apartment price ($544,000). Apartments in Southbank with a car park were sold at a significantly lower premium than those in the CBD, $38,700, compared to $59,000. This may be due to the greater accessibility to car spaces and space being not so much of a premium.
A quick internet search reveals that secure car parking is available to purchase in Melbourne’s CBD for around $30,000 – $50,000 depending on location. The car park premium in apartment blocks such as 668 Bourke Street and 25 Wills Street is significantly less than what is currently on offer in close vicinity, $40,500 and $37,900 respectively. Here it would be worth buying an apartment with a car park even if one is not required, simply for the resale value. However, the higher end, more expensive blocks are likely priced at a higher premium because of the convenience and location. This means that if walking a block or two is not a problem, shopping around for a car space could save you some money, especially in some of the more sought after apartment blocks.
CAR PARKING STUDY – INNER CITY SUBURBS
In this section, we looked at two bedroom, one bathroom, single level terrace houses in 30 different inner Melbourne suburbs. Listed in Table 4 are the expected prices of a 150m2 terrace house sold in the base year (June 2012- May 2013), relative to the first highlighted suburb listed. Below each is the additional value of the same size house if it were sold the following year (June 2013 – May 2014), as well as the premium of those that were sold with an on-site car park. Note that results marked with an asterisk are not statistically significant.
Growth from 2012-13 to 2013-14 was strong in all suburbs, especially in the inner Northern suburbs: just over 12% of the value of an average two bedroom house in Brunswick. The most expensive suburb for a 150m2 house was Middle Park, where the expected price was $868,000 in 2012-13 and $925,000 in 2013-14. Lot size had the biggest value in the Southern suburbs, where each additional square metre added about $992, while land was cheapest in the Eastern suburbs, where each m2 only added about $381. In the Western and Northern suburbs, space was valued very similarly at $742 and $782 per square metre respectively.
Most interesting were the results on car parking. Whether the property featured a car spot or not only made a difference in the Southern suburbs, namely South Melbourne, Albert Park, Middle Park and Port Melbourne. Here, properties with a car park sold for $42,000 more than those without. In all other suburbs, buyers seemed to place no significant value on car parking. Perhaps this shows that even though space is becoming more and more valued, people are not yet worried about the availability of off street parking when looking for houses in Melbourne’s inner North, East and West.
However, the main reason that might explain why car parks are more sought after in the Southern suburbs is average lot size, which at 131m2 is smallest in the South, compared to 170m2 in the East, 176m2 in the West and 178m2 in the North. An average lot size difference of 45m2 for houses that have the same number of bedrooms and bathrooms and thus most likely are very similar in size, is more than enough to fit a car, even if a garage or other car parking facility is not yet installed.
Another factor to consider is parking permits and the availability of street parking in a given suburb. If permit parking is allowed, off street parking becomes less of a factor. Alternatively where parking spaces and permit parking is sparse, as in Melbourne’s CBD, off street parking would be valued at a greater premium. Councils have become much more strict when implementing parking permits. This is something to consider when moving to a new neighbourhood.