Memo to Budapest developers: Quit bitching about having to build garage spaces

There was an interesting piece a few weeks back on vg.hu about how the regulations forcing developers to build parking garage spaces may be negatively impacting the local residential property market. The piece features one Danny Bercovich, managing director of District XIII’s Narancs Liget project, as saying that the prices of new flats in Budapest could be millions of forints lower if developers were able to allow market forces to determine how many garage slots they build, rather than being obliged to do so. Bercovich went on to say that in several recently-built lakóparkok, nearly 90% of apartments were bought, while 40% of garages remain unsold. Being someone who is naturally predisposed to letting the market govern decisions like this, I was initially sympathetic to Bercovich’s argument. But after a bit of thought (and a few unreturned calls to him for further comment) I am not so sure.

Bercovich’s complaint is not new. Almost two years ago we had a similar story, in which some executives put the “extra cost” of such spaces at up to 25% of the cost of an inexpensive flat, and talked of a major glut of unused spaces across the city.

But what’s weird is that these same stories often then go on to complain about how expensive such spaces are when it comes to sell or rent them. The most recent piece puts the price of a downtown garage space at Ft 3-4 million (€11,300-€15,000).

From my own experience trying to rent such a slot in the inner part of District VI, they don’t come dirt cheap, probably costing between Ft 15,000-Ft 20,000 a month, or around 25% of the rent on the sort of flat these spaces come “attached” to. This should not be surprising: In my neighborhood, even if you have permission from the district to park on the street, you can drive around in circles for quite a while before you find a place to actually do it. And that’s without even considering that the district should (and probably will) at some point limit parking to one side of some narrow streets, such as Zichy Jenő utca.

Of course, one could argue that, by mandating the creation of new parking spaces, the authorities are encouraging people to use cars rather than public transport to get around. But the fact is that Hungarians – and especially the folks who tend to favor newly-built flats – want cars. And this is likely to be more the case the farther from the center you go. In a land of bad regulations, mandating that each new flat have a parking space seems one of the least bad such regulations.

The bottom line here is that what is really required is a more transparent and efficient market in allocating these spaces. The technology is certainly there (my garage has one of those radio-control things that sits on my dashboard, meaning all I have to do is drive in and drive out.) What is now needed is for flat owners and developers to stop their whining and just sell or rent the damn things for whatever the market will bear, foregoing the traditional impulse to sit and wait for a “sucker” to come along and overpay. On the other hand, if auto ownership continues to grow – and the number of “free” parking places on the street drops – over time these slots may become more valuable than the flats they are supposedly such a drag on.