Economics & Finance / Industry & Sectors / Real Estate & Housing

Hong Kong Property Rebounds Strongly: Mainland Buyers Growth, Commercial Sector Sees Mixed Recovery

Hong Kong’s property market witnessed a clear bottoming and rebound in 2025 after four years of price adjustments, with the recovery featuring structural differentiation across residential, office and retail sectors, driven by multiple factors such as mainland Chinese buyers, rising rents, falling interest rates and a booming financial market. In the residential market, the second-hand private residential price index rose for eight consecutive months by November 2025, with a 2.8% annual increase, and the full-year transaction volume is expected to hit 62,000 cases (a 17% year-on-year rise), a new high since 2021. Mainland buyers have become a core driving force: the number of transactions registered under Mandarin Pinyin hit a record high since 1995 in the first 11 months, accounting for 23% of total residential transactions, with their average transaction price surging nearly 50% from the February low. Rising rents (a 4.26% annual increase by November) and falling mortgage rates (the actual new mortgage rate at around 3.25%) have spurred renters to become buyers, with nearly 70% of indicator estates seeing rental yields higher than mortgage rates. The residential market shows a two-sided boom: small and medium units under HK$6 million dominate transactions (over 60% of total volume), while luxury properties in prime areas also rebounded strongly, with super luxury primary transactions exceeding HK$10.2 billion in July-October. The office market, dormant for six years, saw a turning point in 2025. Prime Central office rents rebounded first, with the net absorption of Grade A offices hitting a high since Q2 2019 in Q4. Mainland tech giants including Alibaba, Ant Group and JD.com splashed out billions of Hong Kong dollars to acquire core office properties, and international financial institutions such as hedge funds made large-scale leasing deals, setting a record for the largest single office lease in Central. The boom is backed by a thriving financial market: Hong Kong is expected to reclaim the top spot in global IPOs in 2025 with HK$272.1 billion in fundraising, boosting demand for office space from financial and professional service firms. Office properties accounted for 65% of non-residential large-scale investment transactions in 2025, a sharp rise from 29% in 2024. The retail shop market is recovering from core areas, with the vacancy rate of prime street shops in Central, Tsim Sha Tsui and other key districts falling to a post-pandemic low of 6.6% in Q4 (4.3% in Central). The recovery is driven by a 12% year-on-year increase in visitor arrivals in the first 11 months and six consecutive months of growth in retail sales. Looking ahead to 2026, Hong Kong’s property market is set for a mild recovery with solid economic fundamentals and the Fed’s rate cut cycle boosting liquidity. The residential market is expected to see moderate price and volume growth, with a 5% projected rise in small and medium residential prices and more significant gains for new and young estates. However, challenges remain: the residential market still has inventory to digest, and the office market will face 130,000 square meters of new supply in 2026, keeping overall rents flat (a narrow range of -1% to 1%). Retail shops will see a polarised recovery, with core street shop rents expected to fall 0%-5% and premium mall rents 5%-10%, as overall vacancy rates remain high due to weak employment and unbalanced tourism. Additionally, the office investment market is constrained by low capitalisation rates and tight bank lending, and the recovery of large-scale office transactions will take more time.