Hong Kong's lending institutions are actively shifting their focus towards financing student housing projects, converting old hotels and office buildings into dormitories. This trend is fueled by a significant increase in mainland Chinese students enrolling in Hong Kong universities, with over 94,500 student visas and entry permits approved in 2025, more than double the 2022 figures. Government support, including raising the cap on non-local undergraduates, further enhances the appeal of this sector, offering steady rental income with yields comfortably reaching 5%.
This newfound interest comes as banks previously shied away from commercial real estate. Colliers has identified 25 such projects from 2024 through the first half of 2026, totaling approximately HK$10.7 billion ($1.37 billion), a substantial increase from earlier periods. Noteworthy deals include Centaline Investment seeking a HK$1 billion ($128 million) loan to transform the Regal Oriental Hotel, with Bank of China (Hong Kong) securing the deal over competitors. Wee Hur Holdings also obtained financing from HSBC Holdings for a 500-bed student apartment conversion of the One Bedford Place office tower in Kowloon.
While there's strong appetite from various banks, including local, Chinese, Singaporean, and international lenders, some caution remains, especially regarding office-to-dorm conversions which are considered riskier and have yet to demonstrate significant returns or successful exits. About 30% of Centaline Investment's current considerations involve office conversions, up from a few previously. Despite the potential for oversupply in the coming years, developers like Wee Hur Holdings remain optimistic about opportunities in well-located areas, anticipating a shortfall of 147,200 student beds by 2029, according to Jones Lang LaSalle.
