In the first half of 2025, driven by the low interest rate environment and abundant local funds, the Hong Kong property market was more active than last year, but the housing prices did not rebound significantly, and the pace of recovery was still cautious. According to data from the Rating and Valuation Department, as of March 2025, Hong Kong's private residential property prices had fallen by about 30% from the high in 2021, hitting a new low in nearly 9 years, especially small and medium-sized units, with a significant decline, and some areas in Kowloon and the New Territories had negative assets.
However, Morgan Stanley's latest report pointed out that the Hong Kong property market is entering a new upward cycle, and it is expected that property prices will stop falling and rise by about 2% in the second half of 2025, and may start an upward trend that will last for 4 to 5 years. The bank's analysts believe that three major structural factors, including the recovery of housing demand in mainland China, Hong Kong's rental yield advantage and strong performance of the capital market, are creating conditions for the property market to bottom out and rebound.
In 2024, the transaction volume of Hong Kong's property market hit a three-year high. Thanks to the government's withdrawal of the "tough measures" in the property market, the relaxation of mortgage policies and the interest rate cut cycle, the market sentiment has clearly warmed up. The transaction volume of first-hand properties has increased significantly, and the developer's price reduction promotion strategy has been effective; the transaction volume of second-hand properties has also rebounded, but prices continue to adjust. In terms of rent, the Centa-City Rental Index has rebounded to a five-year high in November 2024, reflecting the increase in rental returns, attracting more investors.
Looking ahead to 2025, Goldman Sachs predicts that housing prices will bottom out this year and start to rise next year. It is optimistic about Sun Hung Kai Properties and Cheung Kong Property, predicting that housing prices will rise by 3% and 4% in 2026 and 2027 respectively. At the same time, the market still needs to pay attention to geopolitical risks and uncertainties in international capital inflows.
In addition, the JLL report pointed out that in the first quarter of 2025, the capital prices and rents of most residential and commercial properties in Hong Kong continued to fall, with only luxury home rents recording an increase, but residential transactions remained active. The market expects that the prices of small and medium-sized residential and luxury homes will fall by about 5% this year.
In summary, after years of adjustment, the Hong Kong property market is gradually bottoming out and entering the early stages of recovery. The low interest rate environment, policy support and the recovery of mainland demand are the main driving forces, but the market still needs to carefully observe the impact of global economic and political changes. First-time homebuyers can pay attention to the opportunities brought by the relaxation of mortgage policies, rationally assess risks, and enter the market cautiously.
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