Car Ownership Ratio Low Despite Relatively High Income

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

February 2004 

This is the profile for Hong Kong among Asian economies and cities, and is based on researches done by professional groups in 2003. The more interesting and salient points are as follows:

1)      Target Sample Group = CEOs, top executives, senior managers, professionals, business owners etc from Hong Kong, Singapore, Kuala Lumpur, Bangkok, Manila, Jakarta, and Taipei were surveyed, and these represented roughly the top 10% of the population in terms of earned income.

2)      Average Individual Income in US$ terms = is around US$27,000 with Hong Kong being the highest at US$65,000. Singapore, Kuala Lumpur, Bangkok, Manila, Jakarta, and Taipei earn US$41,000, US$16,000, US$12,000, US$8,000, US$7,000, and US$33,000 respectively.

3)      Car Ownership Ratio = the average of the 7 cities is 65%, but Hong Kong has the lowest ratio this instance at around 34%, and 64%, 92%, 69%, 64%, 56%, and 82% apply to Kuala Lumpur, Bangkok, Manila, Jakarta, and Taipei respectively. Please note this car ownership ratio may also be influenced by other non-economic-financial factors such as transportation policy, industrial policy, economic structures, and the like. Broadly, such policies are either pro-car-ownership (especially in economies which produce their own cars) or against car ownership.

4)      Luxury Rental Levels = expressed in US$ / per m2 floor area / per year. Hong Kong has the highest figure at around US$400 while Manila has the lowest at US$50. The rest hover between US$70 to US$215.

5)      Prime Grade A Office in CBD Rental Levels = expressed in US$ / per m2 floor area / per year. Hong Kong again has the highest figure at close to US$400, while Kuala Lumpur is lowest at US$63. The rest hover between US$70 to US$240.

A few simple correlations have been done:

a)      Income and car ownership ratio have little correlation = as the level of car ownership can be very much influenced by non-economic factors such as government policies, which collectively may either directly or indirectly, intentionally or unintentionally, render car ownership a burden or a breeze. Also, the urban pattern and city density may also affect peoples enthusiasm to own a private car. For instance, cities with a good public transportation network may render a private car less necessary.

b)      Income correlates well with rental levels = both residential and office. This is not surprising as in the long run, it is rare to find high income cities with disproportionately low rents. Everything in an expensive city tends to be more expensive.

c)      Car ownership ratio and rental levels do not correlate much = please note we are just talking about car ownership ratio, not the type / make / quality of cars. Perhaps the latter aspects would have a bit more correlation with rentals.

While rental level would have some implication for real estate prices, which in turn means income would have some hints on real estate prices, car ownership ratio is not a reliable indicator of what real estate prices may be.

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