Hong Kong is increasingly seen as an attractive market for student accommodation, driven by the city's ambition to become an international education hub. The Hong Kong government has outlined plans in its 2023 Policy Address to double the admission quota for nonlocal students at government-funded postsecondary institutions and expand scholarship programs. These initiatives are part of a broader effort to turn Hong Kong into a global education centre, aiming for increased student enrolment, particularly nonlocal students.
However, the demand for student housing far outweighs the supply. Despite efforts such as the Hostel Development Fund aiming to increase accommodation by 13,500 beds by 2027, a significant shortfall remains. According to Cushman & Wakefield'sWakefield's report, the city faces a shortage of nearly 55,400 student accommodation beds as enrollment numbers continue to rise.
At the same time, the traditional office, retail, and hotel sectors in Hong Kong are facing oversupply and declining rental yields. Office rents have dropped by 30 per cent from their peak, and the retail and hotel markets are also struggling with high vacancy rates and unsatisfactory occupancy levels. This has shifted investor interest towards student accommodation, which offers more attractive rental yields between 5 per cent and 6 per cent, compared to the commercial property sectors.
Student dormitory investments are increasingly considered stable and profitable, especially as nonlocal students often pay one year's rent upfront due to limited availability. Institutional investors are actively entering the market, partnering with local developers to convert existing properties into student housing, including the repurposing of hotels.
Despite the positive outlook, experts highlight the risks associated with student housing investments, including high capital costs, regulatory hurdles, and the impact of fluctuating interest rates. The government is exploring ways to streamline the building conversion process and create a more conducive environment for investment, including pilot programs to expedite applications for student housing.
For Hong Kong to fully realise its potential as a global student housing market, long-term plans and designated land for purpose-built student accommodation will be crucial.
