
Hong Kong’s property market, long battered by interest rate hikes, geopolitical jitters and a post-pandemic hangover, appears poised for a pivot in 2026. After a 24% plunge from its 2021 peak, the sector is showing flickers of life, buoyed by falling borrowing costs, a resurgent stock market and an influx of mainland talent. Yet, as ever in this high-stakes financial hub, optimism is tempered by oversupply and external uncertainties. With the Hang Seng Index up 28% in 2025, the wealth effect is trickling into bricks and mortar – though not a full-blown boom just yet.
Residential market: Embracing multiple tailwinds. Hong Kong’s residential sector, long a perennial soap opera of sky-high prices and cramped flats, is finally staging a comeback. Mortgage costs have eased markedly alongside the US’ multiple rate cuts. Concurrently, average rents have surged, driven by the Top Talent Pass Scheme (TTPS), which funnelled over 260,000 professionals and their families (accounting another c.240,000 population) into the city from end 2022 to Dec 2025. With surging rents, lower prices, and falling mortgage rates flipping the script on “positive carry”, investor interest is naturally returning. According to estimates from JLL, TTPS holders are projected to add c.12,000 units of annual leasing demand through 2027, 70% of whom rent private homes. Expat recovery is also rebounding – after years of brain drain, Hong Kong’s population stabilised at 7.53mn in mid-2025, bolstered by 18.2k net inflow from mid-2024 to mid-2025 (or +180k from mid-2022). Non-local student visas are set to hit 90,000 by 2026, further propping up rentals.
The wealth effect from a buoyant stock market plays a starring role as well. The Hang Seng Index and property prices have historically shown a strong positive correlation, with equities typically leading by around six months. Total units transacted have also reached a six-year high in 2025, rising 22% y/y to over 20,500 units. Overall, demand dynamics are showing encouraging signs.
Supply dynamics are also favourable. Completions of private residential units are forecasted to dip from a long-term average of c.18k units to only c.14k for 2026F-28F. Such improvement in supply-demand, more attractive prices, and a positive wealth effect from the stock market are supportive of the stabilisation of property prices.
Retail properties: Boosted by stock market wealth effect and tourism revival. Supported in part by the same wealth effect rippling through households, retail sales rose 6.5% in Nov 2025, capping a string of monthly gains. Tourism has played a critical role, with tourist arrivals reaching c.50mn in 2025, up 12% y/y, turbocharged by mega-events like concerts and festivals. Recent shopping mall operational statistics also points to stability – high-street vacancies are at their lowest levels since the pandemic with rents staging modest growth. We believe retail sales, and by extension the commercial property outlook, should remain well supported in 2026 as experience-led retail grounded in culture and affordability draw consumers back.
Offices: Supply-demand imbalance persists, but early signs of stabilisation are emerging. The office market, a barometer of Hong Kong’s financial heft, is inching towards equilibrium. Net absorption soared to 2.3mn sf in 2025 – the highest since 2018 – fuelled by hedge funds, wealth managers, and mainland firms. Corporate demand synced with a revival in capital markets as IPOs and stock market buoyancy spurred expansion.
Yet supply continues to loom large. 1.56mn sf of new Grade A office space will arrive in 2026 and is expected to keep vacancies at mid-teens levels despite better space absorption. Such supply-demand imbalances will likely persist and keep rents and valuations under pressure. Nevertheless, signs of stabilisation are emerging, with rents falling by a meaningfully narrower degree. Supply entry is expected to moderate as well from 2027F onwards.
Shining bricks. As Hong Kong’s property sector shifts from doldrums to dawn, the allure of physical assets – those unyielding slabs of concrete and glass – has seldom been brighter. With residential prices having bottomed out in mid-2025 after a 24% tumble from their 2021 zenith, the market is now in the throes of moderate upswing, propelled by easing mortgage rates and wealth effect from the stock market. Talent inflows and a supportive supply outlook (annual completion to dip 27% in FY26-28F) would also absorb excess inventory. For yield chasers, this turning point offers a “positive carry” aplenty – rental yield now outstrips mortgage rates and makes direct ownership a compelling hedge against inflation and currency wobbles in a city where land is extremely scarce.
Hong Kong’s developers have enjoyed a sprightly re-rating in 2025, with shares bounding ahead of fundamentals on bets of rate cuts and recovery. NAV discounts have narrowed sharply and now hovers meaningfully above the sector’s 10-year average of c.50%. Earnings pressure lingers among major Hong Kong developers, with profitability remaining compressed in the near term as they continue to recognise higher cost landbank acquired during the last boom cycle.
That said, the emergence of new catalysts such as further confirmation of home purchase revival, meaningful uptick in transactions, and firming up of selling prices would warrant further re-rating of the sector. Profitability should also recover as developers digest their high-cost landbank and replace with lower-priced parcels.
We prefer developers with residential-heavy portfolios over retail or office landlords. In a market where sentiment can turn as swiftly as policy, patient investors – armed with cash for real assets or waiting for equity dips – stand to reap the rewards of this emerging pivot. Afterall, in Hong Kong’s zero-sum land game, timing is the ultimate premium.
Figure 1: HK residential prices corrected 24% from its 2021 peak (Jan 2015 to Dec 2025)
Source: Centaline, DBS
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