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.