Harrison Woods, managing director of YourParkingSpace, looks at how parking spaces are increasingly being looked at as an investment opportunity.
Over the past two decades we have witnessed huge growth in property prices, particularly in the South-East where the average house price broke through the £100,000 mark in 1998 and today stands at over £250,000.
With rental values struggling to keep up the result is that yields for many buy-to-let properties come in at less than 4%. With rock-bottom interest rates this currently isn’t an issue, but as interest rates rise over the coming years this will become a growing concern for property investors. Parking spaces are one investment option that inventors are already turning to.
The Growth of the Parking Space Rental Market
It was only a decade ago that the concept of renting out a parking space was unheard of. Driveway rentals then started to make some headlines but it was always considered a niche concept, a nice idea for a few people keen to top up their income.
What’s really transformed the market is the growth of the so-called sharing economy. Airbnb is the leader in the sharing economy space, completing normalising the concept of renting out a spare room, and in the process it’s normalised other ideas, not least parking spaces. When people first come across us they regularly comment that we’re like an ‘Airbnb for parking’.
The market for private parking rentals has grown hugely and it’s this growth in the ease of being able to rent out parking spaces that some savvy investors have cottoned onto.
Typical Rental Prices & Yields
Whereas a traditional buy-to-let property may generate a 5% yield, yields on parking spaces can regularly hit in excess of 10%. As an example, we’ve seen parking spaces in Paddington in London go for as little as £21,000 each in auctions. When you consider that the rental value of a single space in Paddington is £3,000 per year, that’s a rental yield of over 14%.
Across the country parking space rental prices do vary widely. You’re best off searching for parking spaces in your area to see what other people are charging, but typically in Manchester you can expect to earn £1,200 per annum, £1,400 in Edinburgh, and £1,600 in Bristol. There are some real hotspots out there though – Brighton is the obvious example, where some driveway owners are earning £15 per day through short-term rentals.
We are also seeing some buy-to-let landlords starting to separate the parking space from their property, letting it separately in order to generate the maximum income. Through using a managed service such as ours it can be hassle-free.
How to Purchase Parking Spaces
When you start looking around there are a surprising number of parking spaces for sale. A good starting point is Rightmove, as estate agents will typically sell parking spaces, garages and land.
A second option is to have a look on sites like Gumtree – just be careful to do all the background checks if you find a space via this route.
Finally, particularly in London many parking spaces are sold through auction houses. Have a look through the auction list of a property auction house and you’ll almost certainly find a number of parking spaces and garages along with plots of lands that could be used for parking.
When it comes to the legal side of things, a good lawyer should be able to complete all the legal documents required for purchase for in the region of £500 to £1,000.
Other Parking Space Investment Schemes
Parking investment schemes are starting to pop up, such as the ParkFirst opportunity at Glasgow Airport. Their returns can look very attractive but as with all investments of this type you need to do your research.
These types of schemes are still fairly new so there’s no track record to go by – therefore many investors do prefer to purchase a single parking space outright rather than invest through one of these schemes.
Finally, remember that parking spaces aren’t particularly liquid assets. You tend to have to wait for the right buyer to come along so if you’re likely to need the cash anytime soon you’re probably better investing it elsewhere. As of today you also can’t get mortgages on them, so there isn’t the opportunity to leverage your money.
However, with the high yields and the likely interest rate rises to come in the years ahead, the trend of investing in parking spaces is only likely to grow in popularity.