Debenture prices for Hong Kongs international schools plummet amid emigration, border closures

About 41,000 pupils study in international schools, accounting for 6 per cent of the total student population.

According to the latest quotations by consultants and a review of past trading prices, the values of school debentures have seen a double-digit drop in recent years.

Debentures at Harrow International School Hong Kong in Tuen Mun were priced at nearly HK$6 million (US$770,000) in 2014, but are now going for about HK$3.4 million, a decrease of 43 per cent.

The Independent Schools Foundation Academy in Pok Fu Lam was issuing capital notes at more than HK$7 million around 2017, but the current market value for second-hand ones has dropped to about HK$4.5 million to HK$4.8 million.

The price of debentures of Victoria Shanghai Academy in Aberdeen has dropped from a high of HK$5.3 million in 2015 to HK$4.2 million now.

Chinese International School in North Point, which only sells debentures to corporate clients, recorded a peak price of HK$12 million in 2015. But at least two agents quoted a current price of HK$9 million, though they noted there was nearly no supply in the market now, as the 10-year debentures were about to expire.

Debentures are one of the main sources of income for international schools – most of which do not receive government funding – and are used to finance construction, maintenance and equipment.

Tony Chan Wai-hung, sales director of Everfine Membership Services Limited, said some schools would give first-hand debenture holders a tuition discount after students had studied there for a set period of time, with the accumulated fee cuts almost equalling the cost of the debentures.

Chan said if the debentures could not be sold on the second-hand market upon students’ graduation, parents could sell them back to schools.

“From my experience, the price of the debentures will only go up when the students graduate,” he said.

But he said prices had gone down amid the emigration wave and the ongoing pandemic border closures. He added demand for debentures was further dampened after some international schools set up branches in mainland China.

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Chan said his company had heard from nearly 20 clients seeking to sell school debentures over the past year. “Some even left the debentures unsold when they emigrated to Britain.”

He said clients looking to buy second-hand debentures were mainly parents on the mainland, as they were not confident about securing places in the city’s international schools and hoped the purchases would improve their children’s chances.

“Most of them wanted their kids to start at Grade One in the international schools in Hong Kong, and the price of the school debentures indeed went crazy from 2015 to 2017,” he said.

Raymond Kwok, founder of BA Marketing & Co Ltd, an agency specialising in buying and selling school debentures for 10 years, agreed prices had been falling.

“The drop started two years ago after the pandemic broke out, especially for Harrow International School, as fewer students from the mainland came to Hong Kong to study. But I think the price will go up after the border opens,” Kwok said.

He stressed that the number of students emigrating was low compared with the drop in those coming to Hong Kong from the mainland.

Still, Kwok said that over the past year, he had been approached by 10 parents seeking to sell debentures before emigrating, something he had never seen before.

Vivian Chui Men-yui, founder and managing director of consultancy Yui Education Ltd, said second-hand debenture prices had come down as more families sold them off before emigrating and as more schools issued new batches.

She also noted debentures were not a guarantee of enrolment.

“If students’ abilities are not strong enough, they will not get admitted, even if they have debentures on hand,” Chui said.

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She said there was a new trend of students from local schools switching to international ones either because their parents wanted to prepare them to resettle overseas, or did not want them to remain in the local education system.

“They would like their children to adapt to an overseas learning environment fast before moving out,” Chui said.

But she said some students from elite local schools could secure enrolment without buying debentures.

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