Introduction

Hong Kong is witnessing a surge in its student housing market, thanks to recent policy changes and innovative hotel conversions. A report released by Knight Frank highlights this exciting transformation, emphasizing the investment potential in this emerging sector.

Government Policy Changes

In a landmark decision, the Hong Kong government has increased the admission quota for non-local students to 40 percent for eight prominent universities, set to take effect in the 2024-25 academic year. This policy shift is anticipated to significantly escalate demand for student accommodations, creating lucrative opportunities for investors in the property market.

Investor Insights

Willis Mak, head of private clients for Greater China at Knight Frank, commented on the shift, stating, "The high returns, low risk, and steady income associated with student housing appeal to a broad range of investors. By converting outdated or underperforming hotels into student residences, we can provide much-needed living spaces for students while generating stable returns."

Current Market Situation

Currently, there are about 35,720 available beds in on-campus university residences across 12 institutions. However, with over 62,000 student visa applications approved in 2023 alone, a shortfall of 23,389 beds has emerged, compelling private investors to step in to fill the gap.

Case Study: Hotel Sav Conversion

One notable example is the conversion of Hotel Sav in Kowloon's Hung Hom area, acquired for HK$1.65 billion ($210 million) by fund manager AEW and local contractor Crystal Investment. Rebranded as Y83, the property now accommodates nearly 600 students along with 20,000 square feet of community space. Remarkably, Y83 achieved 85 percent occupancy in its first year, reaching full occupancy by the second year. In 2023, rental prices ranged from HK$7,000 to HK$12,500, with an increase in rates to HK$8,300 to HK$14,800 in 2024.

Further Expansions in Student Housing

In addition, YX, the student living unit of Crystal Investment, has taken further steps by acquiring the Incredible Residences in Hung Hom and the Hotel Ease Access Lai Chi Kok in Cheung Sha Wan for HK$343 million. These properties will also be converted into student housing, adding to the expanding market.

Market Resilience Amid Challenges

Despite Hong Kong's current property slump, student accommodations persist as a promising sector. The Knight Frank report noted that ten converted hotels or purpose-built student residences now offer a combined total of 2,980 beds. As the demand for student housing intensifies, hotel owners are reportedly eager to sell their properties. For instance, the family of the late "Shop King" Tang Shing-bor has put several properties on the market, including the Hotel Cozi Harbour View in Kwun Tong.

Conclusion

As the landscape of student housing in Hong Kong continues to evolve, the potential for high returns ensures that investors are keenly observing this vibrant and growing segment of the real estate market. If you're considering investment opportunities in Hong Kong, the student housing sector is undoubtedly worth your attention!