Our Head of Asian Gaming & Lodging and Hong Kong/India Real
Estate Research Praveen Choudhary discusses the first
synchronized growth cycle for Hong Kong’s major real estate
segments in almost a decade.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Praveen Choudhary, Morgan
Stanley’s Head of Asian Gaming & Lodging and Hong Kong/India
Real Estate Research.
Today – a look at a market that global investors often watch but
may not fully appreciate: Hong Kong real estate.
It’s Tuesday, January 27th, at 2pm in Hong Kong.
Why should investors in New York, London, or Singapore care about
trends in Hong Kong property? That’s easy to answer. Because Hong
Kong remains one of the world’s most globally sensitive real
estate markets. When [the] cycle turns here, it often reflects –
and sometimes predicts – broader shift in liquidity, capital
flows, and macro sentiment across Asia.
And right now, for the first time since 2018, all three major
Hong Kong property segments – residential prices, office rents in
the Central district of Hong Kong, and retail sales – are set to
grow together. That synchronized upturn hasn’t happened in almost
a decade.
What’s driving this shift?
Residential real estate is the engine of this turnaround. Prices
have finally bottomed after a 30 percent decline since 2018, and
2026 is shaping out to be a strong year. We actually expect home
prices to grow more than 10 percent in 2026, after going up by 5
percent in 2025. And we think that it will grow further in 2027.
There are three factors that give us confidence on this
out-of-consensus call.
The first one is policy. Back in February 2024, Hong Kong
scrapped all extra stamp duty that had made it tougher for
mainland Chinese or foreign buyers to enter the market. Stamp
duty is basically a tax you pay when buying property, or even
selling property; and it has been a key way for [the] government
to control demand and raise revenue. With those extra charges
gone, buying and selling real estate in Hong Kong, especially for
mainlanders, is a lot more straightforward and penalty-free.
In fact, post the removal of the stamp duty, [the] percentage of
units that has been sold to mainlanders have gone to 50 percent
of total; earlier it used to be 10-20 percent.
Why is it non-consensus? That is because consensus believes that
Hong Kong property price can’t go up when China residential
outlook is negative. In mid-2025, consensus thought that the
recovery was simply a cyclical response to a sharp drop in the
Hong Kong Interbank Offered Rate, or HIBOR.
But we believe the drivers are supply/demand mismatch, positive
carry as rental go up but rates go down, and Hong Kong as a place
for global monetary interconnection between China and the world
that’s still thriving.
Second, demand fundamentals are strengthening. Hong Kong’s
population turned positive again, rising to 7.5 million in the
first half of 2025. During COVID we had a population decline.
Now, talent attraction scheme is driving around 140,000 visa
approvals in 2025, which is double what it used to be pre-COVID
level. New household formation is tracking above the long‑term
average, and mainland buyers are now a powerful force.
The third factor is affordability. So, after years of declines,
the housing prices have come to a point where affordability is
back to a long‑term average. In fact, the income versus the price
is now back to 2011 level. You combine this with lower
mortgage rates as the Fed cut moves through, and you have pent‑up
demand finally returning.
And don’t forget the wealth effect: Hang Seng Index climbed
almost 30 percent in 2025. That kind of equity rebound
historically spills over into property buying. As the recovery in
residential real estate picks up speed, we're also seeing a fresh
wave of optimism and actions across Hong Kong office and retail
markets.
So big picture: Hong Kong property market isn't just stabilizing.
It’s turning. A 10 percent or more residential price rebound, a
Central office market finding its footing, and an improved retail
environment – all in the same year – marks the clearest green
lights this market has seen since 2018.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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