The Hong Kong government has revised its private residential housing supply target for the next 10 years to 126,000 units, representing a reduction of 6,000 units. Cheng Hai-yin, Head of Valuation and Advisory Services at CBRE Group Inc, believes that while this adjustment will not significantly affect the overall supply-demand imbalance, it highlights the importance of maintaining stable and transparent land sale programs to address Hong Kong's long-term housing needs.
From a developer confidence perspective, the government places greater emphasis on land supply and long-term planning rather than short-term market support. Consequently, developers may continue to exercise caution, with transaction volumes likely remaining subdued and negative price adjustment sentiment potentially persisting, particularly in the secondary market. Developers may delay new project launches or offer incentives to clear existing inventory.
Regarding land development, Cheng noted that the government's streamlined statutory procedures and administrative processes, along with allowing parking facilities to enjoy floor area exemptions for up to two floors above ground level, will provide developers with greater design flexibility. This enables redistribution of more floor area to residential units, improving project economics and enhancing land utilization efficiency while increasing urban parking supply. Given that Hong Kong land prices have fallen 30-50%, this policy may support gradual land value stabilization and encourage developer participation in land tenders.
Additionally, the government's decision to increase the cap on self-funded non-local student enrollment at each subsidized tertiary institution from 40% to 50% of local student places, and adjust the cap on additional self-funded places for subsidized postgraduate research programs from 100% to 120%, may lead to increased demand for student accommodation according to Cheng.
Combined with the previously launched "Studiotel Scheme," this is expected to support the commercial investment market. Assuming all non-local students require student housing, there will be a shortage of approximately 73,000 beds or more in student accommodation for all tertiary programs by the 2027/28 academic year. The scheme has already facilitated active conversion of existing properties, with 4 hotels and 3 residential buildings converted to student accommodation in 2025. More potential conversions are expected for underperforming hotels in well-connected locations. Furthermore, redevelopment assets can also benefit from floor area exemption facilities and relaxed regulations under the scheme, helping accelerate redevelopment of older commercial buildings in the city.
Under the new Capital Investment Entrant Scheme, the threshold for Hong Kong residential property investment has been lowered to HK$30 million. Andy Chan, Head of Research for Hong Kong at CBRE Group Inc, indicated that this measure is expected to stimulate demand for luxury residential properties and houses. In 2024, residential property transactions valued above HK$30 million accounted for only approximately 2.8% of total transaction volume but represented about 21.7% of total transaction value. He believes the relatively low volume proportion indicates that lowering the threshold will have minimal competitive impact on properties and is unlikely to affect affordability for most families. In other words, the threshold reduction is not expected to lead to a significant increase in overall transaction volume.
Regarding the increase in maximum calculation amount for non-residential properties to HK$15 million, purchase decisions depend on individual needs and commercial market conditions, and are not expected to result in significant increases in commercial property demand.