These are tough times for Hong Kong’s property industry. The Centaline City Leading Index, a gauge of secondary property prices, has fallen 28 per cent since its peak in August 2021 to its lowest level since 2016. The sharp rise in mortgage rates, however, has caused affordability to deteriorate further. The ratio of mortgage payments to median household income stands at 50 per cent, at the higher end of its historical range.
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In the commercial market, office rents have continued to fall as the overall vacancy rate hit a record high of nearly 17 per cent in the second quarter. In the retail sector, Hongkongers have flocked to the mainland for cheaper goods and a wider selection of offerings and entertainment choices, dashing hopes that the reopening of China’s economy would spark a revival in consumer spending. Moreover, the investment market has shrivelled, with only 48 deals in the first half of this year, the lowest number since 2008.
Yet amid the gloom, a bullish mood pervades a corner of the market that has only recently caught the attention of property advisers. Hong Kong’s private student accommodation market has emerged as one of the most promising stories in Asian real estate. This year, JLL and Colliers have published reports spelling out the investment case for student housing as the city seeks to become a hub for higher education in Asia.
The tailwinds for the nascent sector are strong. As of the 2024-25 academic year, the admission quota of non-local students to publicly funded postsecondary institutions is expected to double to 40 per cent.
At a time when countries in the Anglosphere, particularly Australia and Canada, are imposing restrictions on the number of international students, Hong Kong is welcoming non-local students with open arms, especially those from the mainland, who account for the overwhelming majority.
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Demand for student housing already sharply outstrips supply and is expected to increase dramatically. While non-local student enrolments at the city’s postsecondary education institutions reached 73,600 in the last academic year, government-funded student hostels currently provide only 38,000 beds. On the basis that all non-local full-time students and 35 per cent of local full-time students require accommodation, the shortfall could rise to 120,000 beds by 2028, data from Colliers shows.
A view of residential buildings in Hong Kong, on February 25. Photo: Bloomberg
