Last Friday, the Mainland government yielded to public outcry from Hong Kong citizens and indefinitely suspended the plan to relax visa restrictions for travel to Hong Kong for non-permanent Shenzhen residents. Just one week earlier, the government had announced plans to allow non-residents of Shenzhen to apply for multi-entry visas into Hong Kong without having to return to the provincial homes to receive authorisation. By some estimates, an additional 4.1 million Chinese nationals would have been eligible to apply for more regular travel into Hong Kong under this proposed scheme.

Arguments raised against the proposed relaxation of travel restrictions ranged from undue strain on public transport infrastructure, price inflation on everything from food through to accommodation, and an increase in social unrest. While some of these arguments are valid, I believe that it would be a knee-jerk reaction if this scheme is not revisited in the future.

From a real estate perspective, Mainland tourists have been one of the key driving forces behind the strong growth of the city’s retail sector. Since 2003, spending by Mainland tourists has grown at a CAGR of about 15% per annum and accounted for an estimated HKD 110 billion in retail sales in 2011. In recent years, we have also seen Mainland shoppers move beyond the luxury goods market and seen them visit more suburban shopping malls. The shifting focus of Mainlander shoppers has both improved the tenant mix and rental returns in these suburban shopping malls.

These trends have been bolstered, in part, by the introduction of the Individual Visit Scheme (IVS) and multi-entry visas for permanent Shenzhen residents. For Hong Kong’s retail sector to continue to grow and prosper, I believe that we must ensure that we continue to allow steady growth of Mainland tourists into Hong Kong over the longer term. To this end, the government should address the concerns raised by local residents. Possible actions that could be undertaken to alleviate the concerns of local residents include the planning for more retail space, encouraging more conversions of older industrial properties for retail/hotel use, improving public transport infrastructure and providing low cost/subsidised retailing space for displaced retailers, especially in the New Territories. By addressing these concerns, the government could pave the way to re-introduce a refined traveller scheme at a later date.

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