Allan Shek, the owner of a Hong Kong shop selling gold and jade jewelry, says he’s made millions on the side by riding wild swings in the stock market and by buying into the city’s property boom. No more.

Last month, he bought five Hong Kong taxis and the licenses to operate them. Seven or eight of his friends have bought taxis too, he says.

“If I have the ability, I will buy another 15 taxis this year,” says the 60-year-old Shek, speaking with rapid-fire enthusiasm over the latest way to make money in a city where the benchmark Hang Seng Index has fallen almost 7 percent from the year’s high and record property prices have started to decline because of government curbs.

The price of a license combined with a taxi reached a record HK$7.66 million ($987,600) on June 6, the highest since data started being tracked, according Taxixchange.com Ltd., which brokers deals and has monitored sales since 2000. Prices have surged more than 80 percent since taking off in September 2009, as cheap financing and expectations of continued gains draw investors. 

The run-up is sparking warnings of yet another investment bubble in a city that’s no stranger to them, said Billy Mak, associate professor of finance at Hong Kong Baptist University. The prices for the cars ― most are shiny, red Toyota Crown Comfort models imported from Japan ― and their licenses have increased at a faster rate than the income the taxis generate.

“The bubble is already there,” said Mak. “Investors feel that there aren’t many good investment tools in the market, as there are restrictions on the property market, and the stock market is not performing that well.”

Investors typically turn over their purchases to taxi-management companies, which rent them to drivers to generate income. About half the licenses are bought by investors, according to Sintat Motors Management Ltd., another broker. While prices of the taxis and licenses have almost doubled since 2009, daily rental costs of HK$680 to HK$800 have increased by around 12 percent in the same period, said Ling Chi-yung, general manager of Sintat Motors.

Many of the investors are shifting out of the property market, according to Cheung King-sum, Sintat’s executive director. About 10 percent are retirees looking for stable income, he said, while 10 percent of owners are drivers.

Home prices in the former British colony have more than doubled since the start of 2009 because of near-record low mortgage rates and an influx of Chinese buyers. That turned the city into the world’s most expensive place to buy an apartment, according to London-based property broker Savills Plc.

Seeking to slow the housing bubble, Hong Kong Chief Executive Leung Chun-ying introduced a series of curbs, which then led investors to drive up the costs of parking spaces and resulted in more measures. The latest, in February, led to a 2.7 percent drop in home prices since their peak. Transactions in the first half of this year fell to the lowest since 1996.

“Today the return rate of a taxi is higher than that of property,” said Kenny Wong, 42, an investor who owns four vehicles after purchasing his latest last year. “I won’t sell it even if it increases to HK$8 million because there is no better investment for now. After selling it, what can I do except put my money into the bank?”

Taxis generate about HK$18,000 a month after management, maintenance and insurance is deducted, Cheung said.

Putting HK$7.66 million, the record cost of a taxi in June, in a bank would pay just HK$1,277 per month in interest, at a rate of 0.20 percent for a one-year time deposit at HSBC Holdings Plc, with no chance of capital appreciation. The same amount would have purchased a 600-square-foot apartment on Hong Kong Island, according to data compiled by Midland Holdings Ltd. (Bloomberg)