Hong Kong's Purpose-Built Student Accommodation: A Key to Navigating the Property Market Challenges

Challenges in Hong Kong's Property Industry

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 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.

Opportunities for Student Accommodation Investment

Amid the gloom, a bullish mood pervades a corner of the market that has 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 an international education hub.

Growing Demand for Student Housing

• 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.
• Demand for student housing sharply outstrips supply; non-local student enrolments reached 73,600, while government-funded hostels provide only 38,000 beds.
• The shortfall could rise to 120,000 beds by 2028.

Investment Opportunities and Returns

This creates an opportunity for private investors to fill the gap. Currently, there are just nine private student housing schemes providing 2,848 bed spaces, with occupancy rates at 98-100 per cent. Rental growth has increased sharply since 2022, reaching 15 per cent last year.

While the fledgling sector faces significant headwinds, the combination of strong growth, stable income, and high occupancy has turned student housing into an attractive niche segment of Hong Kong's ailing property market. However, the challenge remains in finding suitable stock in prime locations.

Government Support Needed

Private investors are hopeful for government support to expedite the repurposing of properties. Colliers recommends that the government take a proactive approach to developing a purpose-built student accommodation market by streamlining land allocation and planning.

Conclusion: A Bright Spot in the Property Market

With student accommodation emerging as a bright spot in Hong Kong’s property market, aligning the growth of this sector with the need for affordable housing is essential. Chief Executive John Lee Ka-chiu should support private investment to build a new sector that helps tackle the housing crisis.