Are Private Car Parking Spaces and Housing Units Complementary or Substitute Goods?

Previous studies suggest that there are many psychological, social and cultural motives for owning private cars in addition to using it as a means of transportation. In Hong Kong, the cost of car parking space is a very significant cost of car ownership. When a car owner buys a housing unit, he would also need a car parking space. If the motive to own a car is independent of the choice of location of the housing unit, car parking spaces and housing units are complementary goods. However, if car ownership is simply for the purpose of transportation, the decision to own a car and the choice of the location of the housing unit are joint decisions. A home purchaser will consider the cost of car ownership (including the cost of car parking spaces) an integral part of housing expenditure. An increase in the expenditure on the housing unit will mean less is available for car parking spaces and vice versa. Therefore car parking spaces and housing units are substitute goods. In Hong Kong car parking spaces inside in a residential development can be purchased in the secondary market. These car parking spaces are actively transacted so that we can construct car parking price indices for the urban and sub-urban areas. The complementary (substitute) goods argument implies that price trend of residential properties in the urban areas relative to those in the sub-urban areas is positively (negatively) correlated with the price trend of car parking spaces in the urban areas relative to those in the sub-urban areas relative. The empirical results suggest that car parking spaces and housing units are substitute goods.