Narratives are important, especially in the sentiment-driven property industry, where the mood among buyers and sellers is a crucial determinant of the sector’s performance and outlook. If there is a market that desperately needs an upbeat story, it is Hong Kong.
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Since 2018, the city has lurched from one crisis to the next, preventing a recovery from taking hold and casting doubt over the future of Hong Kong’s position as a financial centre.
The facts speak for themselves. In the office market, rents for grade A offices have fallen 40 per cent since the peak in the second quarter of 2019, while the vacancy rate has shot up to a record high of 17.5 per cent, data from CBRE shows. Rents and capital values are expected to suffer further declines this year.
In the residential market, the Centaline City Leading Index, a gauge of second-hand home prices, has dropped 28.5 per cent since August 2021 to its lowest level since 2016. Despite a series of government measures to stimulate demand, transaction volumes in the first quarter fell 19.2 per cent on a quarterly basis. JLL forecasts a further 5 per cent fall in home values this year.
Yet over the past year, a bullish narrative has taken hold among some property advisers. It is not often that multiple big agents publish in-depth reports on the same topic within months. However, student accommodation has emerged as a rare bright spot in Hong Kong’s real estate industry, with advisers seizing on the strong fundamentals and promising investment case for the niche market.
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At a time when countries in the Anglosphere, especially the US, are taking an increasingly hostile stance towards international students, Hong Kong is welcoming non-local students – particularly those from the mainland who account for the overwhelming majority – with open arms as it seeks to become a hub for higher education in Asia.