FIRST PACIFIC Davis Li Weiwun: Hong Kong property market consolidation period may extend to 2028; student housing becomes a new market opportunity.

FIRST PACIFIC Davis Greater China CEO Li Weiwun recently discussed the Hong Kong property market, noting that over the past 40 years, the Hong Kong property market has rebounded after multiple crises such as financial storms, with a long-term overall upward trend. He acknowledged that this round of market adjustment is deep in magnitude and broad in scope, but represents a reasonable correction, and that the long-term outlook for Hong Kong's property market is clear. Li Weiwun expects that the consolidation phase of Hong Kong's property market may last until 2028, with a return to a relatively healthy level expected by 2030. He pointed out that the government has introduced multiple support policies, among which the relaxation of rules allowing office buildings to be converted into student housing is particularly noteworthy. Currently, international capital from multiple locations such as Malaysia and Singapore is continuously flowing into the Hong Kong market, as investors are optimistic about the allocation window created by the market correction; overseas investors also have the ability to bear exchange rate risk, and coupled with attractive lending rates offered by banks, this further boosts foreign investment in Hong Kong real estate. Breaking down by sector, Li Weiwun said that the downturn in the office market was anticipated before the pandemic, and rents are currently in an adjustment cycle; the retail property market remains the main pain point, affected by multiple structural factors including heavy household burdens for local Hong Kong families, constrained consumer spending power, and the external environment, and recovery will take time. In his view, student housing will become a brand-new market opportunity, as this type of asset can drive surrounding consumption and gradually pull up overall improvement in the property market, and he called on the market to remain patient. Regarding external disruptions brought by U.S. interest rate hikes, he noted that the impact of rate hikes is global in nature, and Hong Kong's property market has already completed a round of correction, whereas some other regional markets may have only just entered an adjustment cycle. As for the recently market-watched receivership sale of the Sheraton Hong Kong Tung Chung Hotel and Four Points by Sheraton Hong Kong Tung Chung, the project was ultimately sold for HK$2.7 billion, a discount of more than 50% versus the original developer's construction cost. As the agent responsible for the sale of the project, Li Weiwun believes that although the transaction price represents a significant discount to cost, the project is operating well, with an estimated yield of 4.5%, which is within a reasonable range. Turning to the company's own operations, Li Weiwun mentioned that in the face of the property market cycle shift, FIRST PACIFIC Davis has carried out an organized business layout, with non-agency business accounting for nearly half of overall business, of which property management is an important component and is operating steadily. He added that the company's ability to undertake property management work for government projects such as the new Huanggang Port and the Hong Kong-Zhuhai-Macao Bridge also reflects official recognition of the company's service capabilities.