Pulse Of The Market (Pulse 111 - Thoughts on San Francisco Parking)
Apr 03, 2013
Let’s assume you are thinking about buying a condominium, and let’s exclude luxury buyers ($2 million+) in the conversation. If you have a precious car like this one, you need to park it somewhere, right?
Does it make sense to spend $50,000 - $100,000 for a parking space that may be included in the list price of a condominium?
The City is focused on reducing the cost of housing. They have various strategies. Transit-first and fewer cars are top priority. They are increasing the number of bike lanes, employing articulated buses, and increasing the cost of parking meters, parking tickets, and neighborhood parking stickers. From time to time, they even float the idea of congestion pricing, which would impose a fee on a trip from your home to downtown.
By “forcing” developers to unbundle the cost of a parking space when they build new condominiums, they effectively lower the cost of housing: a $900,000 unit at the Infinity cost $800,000 if the buyer opted not to take a parking space.
How long will you own your condominium?
Lenders tell me the answer is five to seven years. If I can rent a space within a block or two of my home for $300.00 per month, I spend $18,000 over five years.
Compare that to buying a space for $75,000, in which case I put down $15,000 and finance 80%. At an interest rate of 3.0%, I pay $253.00 of principal and interest each month, which amounts to $15,150 over five years; add my $15,000 down and the total is $30,000+. I get my money back when I sell (theoretically). In the case of renting, I don’t.
Besides the issue of cost, there is the issue of convenience. If I live in Diamond Heights or Outer Richmond, I probably have fewer shops in walking distance and perhaps fewer transit options to get to a job downtown. Owning a car for convenience would probably trump cost. The neighborhood where I live matters, as does the issue of personal safety.
Does a parking space appreciate?
Probably not, and certainly not at the same rate as actual living space. With an 8’ x 16’ parking space (128 sq. ft.) and a cost of $75,000, I pay $585/SF. While the City is making parking more expensive, car-sharing programs are making it easier not to own a car. When I lived in New York and housed my car in a garage (at a cost equal to another bedroom), my primary reason was to have a car to escape the city on weekends. Weekend car rentals are a lot more expensive in New York than San Francisco, and there are probably fewer reasons to escape San Francisco on weekends.
Is it easier to sell a condominium with deeded parking?
The answer is probably yes. However, the ease of selling is highly dependent on market conditions. When there is an abundance of buyers exceeding the available supply of property, as we have today, the issue of parking is far less a decider than when markets are more evenly balanced between supply and demand.
Ten years ago, I would have said, “don’t buy a condominium without a deeded parking space.” Now I am less certain. The City is intent on reducing the number of cars and making car ownership more expensive. In response, car-sharing programs are flowering. If you have ample financial resources, buy the parking space. Make sure you inspect it first to assure that you can get into it (this image is not photo-shopped!).
If you are a couple with young kids, all bets are off. Contact me for assistance with any of your real estate transactions.
Written by: Malcolm E.A. Kaufman
Starboard TCN is posting this article on its website and blog with Malcolm E.A. Kaufman's approval.
Malcolm E.A. Kaufman is Founder of PulseFactors™ LLC. He refers you to his website, pulsefactors.com, where you can see recent issues of Pulse of the Market© and learn more about him. He invites your comments, suggestions, and questions.