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Hong Kong's student housing crisis has sparked a lending boom among banks. The Regal Oriental Hotel, considered an unlikely hotspot, has become a favorite among bankers from top lenders who are eager to lend for the transformation of old buildings into student dormitories. Centaline Investment, one of the key players, sought HK$1 billion (US$128 million) in financing to convert the hotel into student apartments, attracting multiple banks.

Bank of China emerged victorious in securing the loan for Centaline. The surge in demand is attributed to a growing number of mainland Chinese students choosing Hong Kong for their education, coupled with favorable government policies. Banks view student housing as not only an attractive real estate investment but also a stable operational business with 5% rental yields.

The trend extends beyond dormitories to office conversions, although these present more challenges and lower returns. Singaporean developer Wee Hur Holdings recently secured financing from HSBC to convert an office tower into a student apartment building. This trend contrasts with earlier student dorm conversions that faced skepticism and stringent credit risk assessments.

The appetite for these deals is so high that some banks are extending offers to prospective borrowers even before transactions are finalized. Tighter U.S. visa restrictions and geopolitical tensions are further encouraging Chinese students to attend universities in Hong Kong, creating a significant demand for student housing. However, the sector still faces uncertainties, with no successful conversion yet generating steady income.

Despite this, there is optimism about finding profitable opportunities, especially as loan volumes in Asia-Pacific ex-Japan dropped to their weakest levels in 16 years.