Marcos Chan, Head of Research, CBRE Hong Kong, said: “Overall, this is a comprehensive Policy Address, with lots of policy initiatives to strengthen Hong Kong’s long-term competitiveness, including but not limited to plans to broaden Hong Kong’s industry base, enrich the city’s talent pool, and improve the city’s overall attractiveness and liveability. While there are not many direct policy initiatives to boost the demand for commercial real estate, there are plans and thoughts to indirectly benefit the sector.”

“Various committees and working groups being set up will help accelerate the future development of Education, I&T, Inbound Tourism and Elderly Care industries; it will also speed up the development of Hong Kong’s low altitude economy and strengthen Hong Kong’s long-term competitiveness.”

“The setup of international commodity exchange and introducing measures to promote preferential tax regime for commodity trades in Hong Kong will support the demand for specialized warehouse and affiliated offices in Hong Kong.”

“V⁠arious measures to promote Hong Kong’s RMB-denominated financial business will forge Hong Kong’s position as a global financial centre and support the demand for wealth management services.”

“The plan to strive for more IPOs in Hong Kong will create business opportunities for investment banks and professional services firms, positive for office demand.”

“The availability of 4 logistics sites will provide future options for logistics-related companies and affected brownfield site users, however, the demand for these sites will depend on how the land leases are structured, and the market outlook for Hong Kong’s trade and logistics sector.”

“Efforts to encourage global and Mainland enterprises to establish international and regional HQs in Hong Kong will support long-term office demand and help resolve the situation of high vacancy in the office market in the long run.”

“The ⁠extension of the validity period of multiple-entry visas for expats in Hong Kong to 5 years will enhance the attractiveness of Hong Kong as a destination for MNCs and overseas talents.”

“The reduction of liquor duty rates will energize Hong Kong’s liquor trading activity and support the demand for temperature-control storage facilities.”

“While plans to extend Air Transhipment Cargo Exemption Scheme to other intermodal cargo-shipment modes will improve Hong Kong’s trading competitiveness, this might reduce the demand for storage facilities in Hong Kong should the re-export cargoes see less of a need to be processed in Hong Kong.”

“Various investments to promote Hong Kong’s I&T capacity will accelerate and strengthen the city’s role as an I&T hub, benefiting the demand for both purpose-built and commercial real estate suitable for tech-related R&D activities.”

“Overall, more global and Mainland tech firms and medical enterprises are expected to establish R&D functions in Hong Kong, benefiting downstream businesses and hence commercial real estate demand.”

“Efforts to promote Hong Kong’s education resources to attract more overseas students will see the growing demand for education real estate, including assets for lecture halls and student accommodation.”

“The proposed resumption of multiple-entry of Shenzhen residents and expanding the coverage of pilot cities for “one trip per week” will benefit inbound tourism and support the demand of retail and services particularly at near the border gates.”

“Re-launching the principal moratorium and HKMA’s plan to provide flexibility in banks’ capital requirement to facilitate lending to SMEs will improve SMEs’ financial burdens and reduce the risk of business closures and help stabilize commercial real estate occupancy.”

“Various timeline for housing supply and infrastructure is given, enhancing the visibility of the future timeline of the Northern Metropolis.”

“Plans to establish a pilot industrial park in Hung Shui Kiu/Ha Tsuen to be led by a Government-owned company will improve the certainty of development timeline but will reduce the development opportunity for private sector developers and investors.”

“Plans to double the size of the HK-SZ I&T Park will enrich the city’s land resources to get ready for the city’s I&T ambitions.”

“The relaxation of LTV and DTI ratios across domestic and non-domestic properties will gradually translate into investment demand, together with expected interest rate decline, overall property demand is expected to improve.”

Hannah Jeong, Head of Valuation & Advisory Services, CBRE Hong Kong, said: “Regarding the New Capital Investment Entrant Scheme, the impact on luxury residential sales will be immediately reflected. After the demand side stamp duty removal and rate cut in Sep, we have seen a meaningful recovery on the volume side. Super luxury home transactions hit a three-year high in the first three quarters of 2024. 72 first-hand luxury homes with more than HKD 100 million were traded in the first three quarters of this year, which was about 22% higher than the 59 transactions in the whole of last year. This policy will further boost up the demand for luxury residential and this category price level will be able to stabilise.”

“On the plan to strive for more IPOs in Hong Kong, IPO market has been an importance source for office demand. Setting up the headquarters for pre-IPO or post-IPO companies in Hong Kong is important and normally these newly listed companies can actively expand within few years. IPO proceeds shrank by 87% in 2023 (as compared to 2021).  We welcome the Government’s idea to boost up the securities market by improving its efficiency and this will help to increase office demand in Hong Kong.”

“Hong Kong’s seaport status declined from the 4^th position to 10^th within a decade. Further the cargo throughput via seaport dropped by 35.2% from 22.2 million TEUs (in 2014) to 14.1 million TEUs (in 2023) given the Hong Kong’s airfreights volume substantially increase. Upgrading and automating he port facilities will enhance the efficiency and the government should provide incentive the port owners. High-value logistics will increase the demand for better warehouse facilities especially for Kwai Chung and Tsing Yi. Current vacancy for industrial sector is about 8% and will lower down in the next two years.  

“The government is also planning to develop a world-leading airport city. Together with third runway opening, the Airport city expansion may accommodate transit and overnight tourism. However the absorption rate in the Airport city commercial spaces is at the low level as attractive rental packages are available within the city centres. We recommend the government to carefully analyse the demand and plan the future supply of the commercial land in this area.”

“Promoting real-world asset tokenisation will help developers and investors on their liquidity issue. Tokenising the real estate can increase the buyer affordability at the same time increase the liquidity in the market. In 3Q 2024, 55% of the capital transactions were based on financially-destressed disposal due to high-interest rate environment and soft tenant demand. Tokenisation can be one of the good exit strategies for investors and this may be able to minimise further capital value drop for commercial assets.”

“Regarding the talent attraction, we expect Hong Kong population will continue to grow, given stronger talent, dependents, and non-local students inflow. Top talent scheme will bring not only the talents but also their dependents which will in turn increase the housing demand especially for the rental market. 2024 YTD, the rental increased 6.2%. We expect that the rent will continue to grow in 2025 up to 10% and exceed the historical peak in August 2019.”

“Government ‘s ideas on a pilot scheme to streamline the application for hostel conversion are excellent. Supplying more student housing and make this sector affordable, will help those advance education graduates to continue to live and work in Hong Kong. YTD, among all the hotels transacted, 3 hotels involving 437 hotel rooms were reported to be converted into co-living and student housing. Many investors could utilise non-performing hotel and commercial buildings into this niche sector. It will be important to have a right operator to manage those facilities.”

“Legalising and safeguarding Sub Divided Units (SDU) will be able to offer better living conditions for different occupiers.  Illegal unit tenants will also move out and look for other affordable residential units which will also increase a residential rental demand for smaller scale units in the New Territories.”

“Relaxing LTV to 70% for all residential units will help to stabilise the residential price as more home buyers can enter the market. Given the further rate cut expectation and attractive incentives offering from developers, the home buyers will be keen to look for home upgrading opportunities. However the supply peak of additional 25K units in 2025 together with 20K unsold units will need to be absorbed. Therefore 2025 will see a slightly positive movement.”

“On expediting urban redevelopment, under the slow economy recovery, many landlords hesitate to redevelop their old industrial sites despite the government GFA incentive. Further the land value decreased more than 30% in the last two years, adding financial pressure to the landlords.  Despite the revitalisation scheme extension is a positive direction, the insignificant impact will be observed in 2025.”

For further information, please contact Marcos Chan, Head of Research, CBRE Hong Kong and Hannah Jeong, Head of Valuation & Advisory Services, CBRE Hong Kong as the details below.