Hong Kong residential property market’s improvement whets investor appetite, analysts say
Hong Kong’s residential property market is gradually mending investor sentiment, according to analysts, who are nonetheless cautious about a full recovery amid geopolitical tensions and economic uncertainties.
Investors accounted for 20 per cent of the market’s total transactions so far in 2025, according to UBS property analyst Mark Leung, who added that some districts with residential projects near universities might have a higher proportion.
The average gross rental yield for mass residential units in Hong Kong – excluding taxes and other expenses – stands at 3.7 per cent, which is attractive to mainland buyers, Leung said.
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Investor interest showed how the market was being driven by possible further interest rate cuts and a potential increase in rents.
HSBC recently introduced a fixed-rate mortgage plan at 2.73 per cent per annum for three or five years. Meanwhile, the one-month Hibor used to price mortgage loans was at 3.5316 on Friday, which indicated banks’ expectation of further rate drops.
A general view of the residential area in Cheung Sha Wan. Photo: Eugene Lee alt=A general view of the residential area in Cheung Sha Wan. Photo: Eugene Lee>
“Investors are rebuilding their appetite, as the worst of times has passed,” said Norry Lee, senior director of projects strategy and consultancy at JLL Hong Kong. “That being said, we are still cautiously observing if the recovery is an L-shaped or U-shaped one amid a macroeconomic downside and an uncertain external environment.”
Rental yields may not be the most attractive incentive for investing in the home market, but lower residential flat prices could be a good entry point for some investors to see capital gains, Lee said.
Hong Kong’s residential rents climbed in August, nearing a record high, official data showed. The rental index jumped by 1.12 per cent – the largest increment in 14 months – to 198.7, just 1.4 points shy of its 200.1 peak recorded in August 2019.
In September, some housing estates near universities gained rental returns of more than 4.5 per cent because of their popularity among incoming students and fresh talent from abroad. For example, Garfield Garden in Kennedy Town saw a rental yield of 4.68 per cent, Midland Realty data showed.
The city’s private housing supply is expected to be reduced between 2026 and 2029, as a result of a sharp drop in land sales caused by the property downturn over the past three years. There will be fewer new launches available to the market, according to Leung from UBS.
Home prices, more importantly, had dropped significantly over the past three years before stabilising from April. The long market slump saw residential prices fall 28.4 per cent as of March this year from their peak in September 2021.
Steel sculpture “Landing”, created by Australian artist Russell Anderson, seen at Plaza 13/31 against a backdrop of private residential developments in Kai Tak. Photo: Jelly Tse alt=Steel sculpture “Landing”, created by Australian artist Russell Anderson, seen at Plaza 13/31 against a backdrop of private residential developments in Kai Tak. Photo: Jelly Tse>
Meanwhile, the senior director of valuation and advisory services at Colliers Hong Kong, Alvin Leung, said evidence of positive sentiment in the market was seen in the “uptick in trophy transactions by investors and end users and multiple-unit purchases by single investors”.
Echoing that assessment, JLL’s Lee pointed out that The Queens project at 160 Queen’s Road in Sai Ying Pun, developed by Paliburg Holdings, sold 80 per cent of the total units in just one month, while No 9 Eastern Street in the same district sold all 76 units in less than three months. “These are investment-driven sales,” he added.
Affluent Hong Kong investors – from the former CEO of the Hong Kong stock exchange to the chairman of Great Eagle Holdings – have been snapping up residential properties, despite doubts by many prospective homebuyers that prices of flats across the city have hit bottom.
Great Eagle chairman and managing director Lo Ka-shui and his family have been acquiring new flats across Hong Kong Island and the New Territories in recent months.
The Lo family bought 11 units at Deep Water Pavilia, a development in Wong Chuk Hang led by MTR Corp and New World Development, according to agents. Of the six units bought in early August, prices ranged from HK$12.5 million (US$1.6 million) to HK$12.7 million, or about HK$21,000 per square foot, according to transaction records.
Great Eagle Holdings chairman Lo Ka-shui. Photo: May Tse alt=Great Eagle Holdings chairman Lo Ka-shui. Photo: May Tse>
Still, UBS expected home prices to remain relatively flat this year and see a rebound of up to 2 per cent next year.
The city’s lived-in home prices rose by 0.14 per cent in August, narrowing this year’s price decline to 0.24 per cent, according to data from the Rating and Valuation Department. Since April, Hong Kong’s home prices have increased by 1.26 per cent.
One benchmark for the recovery will be developers’ sentiment in land bidding, according to JLL’s Lee. “Depending on the number of bidders and the price of bids, this will reflect developers’ outlook for the next three years or so,” he said.
The Hong Kong government will launch a single residential site in Kowloon for tender in its third financial quarter. A plot measuring 40,902 sq ft – enough for about 570 average-sized flats – at Choi Hing Road, Jordan Valley, will be made available via tender in the December quarter.
MTR Corp has also put its Tuen Mun A16 Station package one property development up for tender. The 601,132 sq ft site is estimated to support a total of 1,280 flats. The tender is expected to close on November 5.
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