On February 26, Hong Kong's Financial Secretary Paul Chan announced a significant shift in the city's land sale strategy during his Budget 2025-26 speech. The government will suspend the sale of commercial sites for the coming year due to sluggish office sales and high vacancy rates. This decision aims to allow the market time to absorb existing supply and improve economic conditions. Additionally, the government plans to consider rezoning some commercial areas for residential use, providing greater flexibility in land usage. Industry experts have mixed reactions, noting both potential benefits and challenges posed by this policy change.
The announcement reflects the pressing issue of oversupply in Hong Kong's commercial real estate sector. According to Alex Barnes, Managing Director of JLL Hong Kong, there are currently 14 million square feet of vacant Grade A office space. Furthermore, an additional 7.3 million square feet of new commercial buildings are expected to be completed between 2025 and 2029. To address these concerns, Chan emphasized that halting the sale of commercial sites would give the market more time to stabilize. Hannah Jeong, Head of Valuation & Advisory Services at CBRE Hong Kong, pointed out that it could take 7 to 10 years for the current supply to be fully absorbed.
Marcos Chan, Head of Research at CBRE Hong Kong, suggested that the government should also focus on revitalizing the planning framework to encourage more flexible use of commercial spaces. By converting some commercial sites to residential use, the government can help alleviate the vacancy issues faced by various commercial property sectors while addressing long-term housing demand. However, CBRE Hong Kong has issued a neutral outlook for the real estate sector following the budget speech. Fewer policy measures aimed at directly boosting property demand and the lingering effects of last year’s austerity measures have had limited positive impacts on transaction volumes and property prices.
High financing costs and an oversupply of properties remain significant barriers to meaningful increases in investment demand. Despite the government's efforts, the real estate market continues to face challenges. Nevertheless, the decision to pause commercial land sales and explore alternative uses for surplus commercial spaces marks a strategic move toward balancing supply and demand in Hong Kong's property market.
Strategic partnerships are being forged to broaden economic ties. The Hong Kong government is actively seeking to widen its trade network by engaging more deeply with Global South markets. Financial Secretary Paul Chan outlined ambitious plans in his 2025-2026 Budget Speech, emphasizing discussions with Malaysia and Saudi Arabia for the establishment of Economic and Trade Offices. These initiatives aim to strengthen commercial relationships and facilitate smoother business operations between these nations. Furthermore, InvestHK has extended its reach into Egypt and Türkiye, opening consultant offices that will serve as vital links for businesses looking to tap into these regions. Similarly, the Hong Kong Trade Development Council (HKTDC) has established a presence in Cambodia, underscoring the city's commitment to fostering international trade.
New opportunities are emerging across diverse geographies. Beyond Southeast Asia, Hong Kong is exploring investment agreements with countries such as Saudi Arabia, Bangladesh, Egypt, and Peru. Simultaneously, negotiations for Comprehensive Avoidance of Double Taxation Agreements are underway with 17 nations, aiming to create a more favorable environment for cross-border investments. Leveraging its role as a key platform for the Belt and Road Initiative, Hong Kong seeks to deepen collaboration with ASEAN and Middle Eastern markets. This strategic position also opens doors to Central Asia, South Asia, and North Africa, where business and professional services sectors can uncover new prospects. The HKTDC is focusing on project matching under the initiative, particularly in areas like green development and innovation and technology.
The upcoming 10th B&R Summit in September marks a significant milestone for Hong Kong’s participation in this global initiative. The event will bring together stakeholders from various sectors, encouraging them to host complementary activities during the summit period. By fostering synergies and promoting collaboration, Hong Kong aims to solidify its position as a leading hub for international trade and investment. This proactive approach not only enhances economic growth but also promotes sustainable development and innovation, paving the way for a brighter future for all involved parties.
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