Response to the Budget 2026/2027 by Cushman & Wakefield

We support the Government’s proposal to increase the borrowing ceiling of the two bond programmes to HK$900 billion to finance the development of the Northern Metropolis, and to issue more longer-term bonds to better align with cash flow requirements and capital deployment for infrastructure works. Beyond direct bond issuance, we suggest that, from a broader asset allocation perspective, the Government could make better use of the sizeable Mandatory Provident Fund (MPF) asset pool. According to MPFA data, total MPF assets reached approximately HK$1.55 trillion as at end-December 2025, a record high. The Government may consider moderately relaxing MPF investment restrictions to allow a certain proportion of assets (for example, 10%) to be invested in long-term bonds issued for Northern Metropolis development. This would provide a stable source of funding for the Northern Metropolis while offering MPF members an additional investment option with relatively lower risk and stable returns, creating a win-win outcome.

Land and Housing Supply

The land sale programme for the coming year, together with the projected supply of first-hand private residential units in the next three to four years, indicates that land and housing supply is stabilising. We recommend that the Government streamline tender conditions and release sites to the market in an orderly manner to attract broader developer participation and revitalise market sentiment.

Suggest to Assist “Basic Housing Unit” Residents with Rehousing

The regulatory regime for “Basic Housing Units” is expected to take effect on 1 March this year, with a 48-month transitional period. Some units may fail to meet the new requirements, potentially resulting in tenant displacement. In addition, there are approximately 27,000 units in public rental housing estates aged over 50 years, creating significant rehousing pressure. We consider that the urban renewal strategy should be flexible and financially sustainable. The Government should establish clear rehousing priorities and allocate units reasonably among affected residents, tenants of old estates and applicants on the waiting list.

Under the Urban Renewal Authority’s prevailing acquisition approach, compensation based on prices comparable to first-hand residential properties (including owner-occupier allowances) has imposed substantial financial pressure. We therefore recommend further optimisation of the “flat-for-flat” mechanism to alleviate cash compensation burdens. Specifically, the Government could explore allocating land in new development areas, such as Tseung Kwan O, to the Urban Renewal Authority or related bodies for non-local rehousing under the “flat-for-flat” arrangement. While the current “seven-year-old flat” compensation benchmark has its basis, the Government may also consider offering more attractive exchange terms to older building owners as an incentive to expedite relocation and redevelopment progress.

We believe that such measures would not only reduce the substantial upfront cash outlay at the initial stage of redevelopment and ease liquidity pressure on the Urban Renewal Authority but also enable capital recycling upon project completion and sale, thereby establishing a financially sustainable urban renewal model with a virtuous funding cycle.

We agree with the Government’s decision, having regard to prevailing market supply and demand conditions, to continue refraining from the sale of commercial sites in the coming year. As at the end of the fourth quarter last year, the overall availability rate of Grade A offices in Hong Kong stood at approximately 20.3%. The temporary suspension of commercial land sales will allow the market to gradually absorb existing vacant floor space and help stabilise the office market. Nevertheless, the Government should review market conditions regularly and resume the sale of commercial sites in a timely manner when appropriate.

Regarding collaboration between the Hong Kong Investment Corporation and market capital to guide funds towards quality commercial property projects aligned with Hong Kong’s industry positioning, and to facilitate matching between such projects and enterprises in target sectors, we consider the overall direction to be positive and consistent with market-oriented principles. This approach can enhance the efficiency of matching projects with enterprises, provide more suitable premises for emerging industries such as innovation and technology and medical research, and inject new demand into the commercial property sector.

Sandy Ridge data facility cluster to enhance Hong Kong’s data hub position

The Government has accelerated efforts to promote the industrialisation of artificial intelligence (AI), encouraging its wider adoption and deeper integration across industries. Over the longer term, this will substantially increase demand for computing power, thereby strengthening local absorption capacity for high-specification data centre facilities.

Regarding the proposed data facility cluster at Sandy Ridge, which will provide over 2.5 million square feet of gross floor area, this represents approximately 25% of Hong Kong’s existing data centre stock of around 10 million square feet, marking a rare large-scale supply in recent years. Should the project be successfully tendered, it will provide the high-power capacity and infrastructure necessary to support AI development, and in the longer term enhance Hong Kong’s position as a data hub within the Greater Bay Area and across Asia.

Strengthening Hong Kong’s Position as an International Maritime Hub and Responding Flexibly to Logistics Land Needs

The Government has proposed supporting the national maritime strategic development, advancing the elevation of Hong Kong’s status as an international maritime centre, and accelerating the smart transformation of the logistics industry as well as the expansion of cargo hinterland. The reservation of approximately 32 hectares of land in the Hung Shui Kiu/Ha Tsuen New Development Area for the development of a modern logistics hub will further help consolidate Hong Kong’s role as an international maritime centre. However, we consider that in developing a modern logistics industry park, the Government should adopt a market-oriented, enterprise-centred approach, in order to respond flexibly to the needs of businesses and offer appropriate incentives to attract enterprise participation.

Diversified Policies and Continuous Investment to Energise Retail Consumption and Leasing Market

We welcome the Government’s introduction of diversified initiatives and continued funding to promote Hong Kong’s exhibition industry, incentive travel, revitalisation of historic buildings, international cruise development, major sports events, harbourfront enhancement works and the “urban-rural integration” initiatives. Through these targeted and wide-ranging programmes, Hong Kong will be able to attract visitors of different segments and spending power, broaden its visitor base and enhance the overall competitiveness of the tourism industry. We believe these measures will drive the development of high value-added economic activities, further stimulate local retail consumption and invigorate the shop leasing market, thereby injecting additional momentum into the overall economy and delivering long-term benefits.

We remain optimistic about the medium- to long-term outlook for retail rents in Hong Kong. As the relevant policies are progressively implemented and tourism continues to strengthen, we expect retail rents to show more positive adjustments.

With the implementation of various talent admission schemes, the planning of the Northern Metropolis University Town, and policies aimed at attracting outstanding students from around the world to study in Hong Kong, demand for residential accommodation and student hostels is expected to continue rising.

The Development Bureau earlier announced the rezoning of three commercial sites in Kai Tak, Siu Lek Yuen in Sha Tin and Tung Chung East for post-secondary student hostel use, which are expected to provide around 4,500 hostel places. The further implementation of relevant measures in this Budget will help alleviate the shortage of hostel places and, in the longer term, ease rental pressure in the residential market, supporting the healthy development of the property market.

However, as student hostel projects are not permitted for strata-title sale and typically involve a longer payback period, we recommend that the Government provide appropriate incentives in the land sale conditions. For example, priority could be given to sites located near post-secondary institutions, and greater flexibility could be offered in land premium arrangements or tender terms to encourage active participation by developers.

Northern Metropolis University Town

Regarding development of Northern Metropolis University Town, the Government has demonstrated its commitment to expediting the development of higher education and advancing the “Study in Hong Kong” initiative by granting three sites in the Hung Shui Kiu/Ha Tsuen New Development Area and earmarking HK$10 billion in loans to support campus construction. This will help further enhance Hong Kong’s overall attractiveness as a regional education hub.

We hope that, as student intake and campus sites are introduced into Hung Shui Kiu/Ha Tsuen, they will be closely aligned with the district’s industry positioning and functional roles, generating synergy. At the same time, a clear division of roles and complementary development should be established with future education sites to be launched in Ngau Tam Mei.

We support the Government’s continued efforts to strengthen talent admission from both Mainland and overseas markets. However, this year’s Budget did not set out concrete measures to assist incoming talent in acquiring properties in Hong Kong. We recommend a calibrated adjustment of the investment threshold and an expansion of the categories of qualifying investment properties. Instead of restricting investment solely to non-residential assets, the Government could consider prudently incorporating selected residential properties into the scope.

At the same time, we propose a review of the banking and mortgage restrictions applied to non-local investors, with a view to enhancing flexibility in capital deployment and circulation. These refinements would help attract additional international capital and high‑calibre talent to establish a long‑term presence in Hong Kong.

Prudent Adjustment of Stamp Duty on Luxury Residential Properties

Regarding the Government’s increase in stamp duty on residential property transactions exceeding HK$100 million, and in line with the “affordable users pay” principle, we consider the adjustment to remain at a rational level. Nevertheless, in the short term, it may lead some potential buyers to defer their purchasing decisions. We believe that once the market has adjusted, transaction momentum in the luxury residential segment should remain resilient. We would encourage the Government to continue exercising prudence in adjusting stamp duty rates on luxury properties, so as not to undermine the overall attractiveness of Hong Kong’s property market.