They'll pave over yields and put up parking a lot Maurice Dunlevy May 19, 2005 The Australian
They'll pave over yields and put up parking a lot
May 19, 2005
ATTRACTIVE yields on Melbourne car parks could evaporate, with a new CBD parking levy likely to come in at the start of next year.
That's when the Victorian Government plans to bring in a $400-a-year charge rising later to $800 a year on 48,000 long-term parking spaces in and around the Melbourne CBD.
The tax is expected to raise $40 million, mainly from car park users. But Property Investment Research's John Welch said car park owners would share the pain.
"There's a limit to how much parkers are prepared to pay, and therefore the tax will affect car park profitability," he said.
He said car parks had been the stand-out investment in an otherwise flat CBD market, with yields at a healthy 8 per cent.
Most public parks are privately held, with listed property trust ownership limited to a handful of properties.
Melbourne's last big car park sale was in late 2002, when Grosvenor Australia Properties paid $40.35 million, on an 8 per cent yield, to Commonwealth Property Office Fund for its 101 Collins Street car park.
After stumbling during the late 1990s when Lloyd Williams' Crown Casino flooded the market with 8500 spaces, pushing down all-day parking prices down to as low as $5, the sector has had a steady climb back, with long-term parks commonly costing $250 per month, plus GST.
Wilson Parking group general manager John Nolan said until now there had been a happy medium between affordable all-day parking and owner returns.
But Mr Nolan predicts lower returns for owners as a result of the proposed Victorian Government tax.
Mr Nolan said he didn't know how much yields would fall, but based on the Sydney experience where a similar tax was introduced in mid-2000, they would fall or, at best, be capped.
"Car park profitability has fallen in Sydney over the past four years, and that's put an 8 per cent cap on yields," he said.
Mr Nolan said increased taxes always hurt owners and operators because parking was a discretionary spend.
The Property Council of Victoria said it was a cynical business tax dressed up as a green initiative to ease congestion and create thousands of parking station short-stay spaces.
The Government argues the measure is necessary to reduce peak congestion and encourage short-stay off-street parking to deliver more customers to CBD shops and restaurants. Shopping Centre Council of Australia executive director Milton Cockburn said the Melbourne levy announced about the same time as a similar proposal for Canberra was dropped would do little to reduce congestion.
Property Council Victorian executive director Jennifer Cunich said the tax appeared to be a grab for revenue. "It hasn't been thought out properly because not enough consideration has been given to doing business in the CBD.
"I haven't seen any research or evidence that it is going to ease congestion."
Ms Cunich said similar levies in Sydney and Perth hadn't eased congestion, and in Perth they had distorted the market by discouraging office tenants from the CBD.
While the Melbourne CBD is estimated to have about 70,000 off-street car parking spaces, the tax will apply to 28,000 daily-rate parks at privately operated car parks and about 20,000 spaces within office buildings. The balance comprises privately owned spaces largely in apartment buildings.
For the first year of the tax, Wilson Parking estimates it will add $3.30 to all-day public parking charges.
Car park owners will be required to disclose all-day and permanent parking bay numbers on an annual basis.
The Government will police numbers with periodic site inspections, but compliance, said the Property Council, would be difficult and expensive.
Car park owners contacted by The Australian said they knew few details of the parking levy, other than what they had read or heard in the media.
Graham Gordon, who operates a car park near Spencer Street, said less all-day parking would probably affect his business, but it was too early to say how much.