The property market in Hong Kong is anticipated to witness a robust recovery in 2025. Residential prices are forecasted to climb by 3%, while retail sales value is expected to surge by 5%. This upturn is driven by several factors, including lower interest rates, increased demand, and a resurgence in tourism. The residential sector is set to benefit from declining mortgage costs due to anticipated U.S. Federal Reserve rate cuts, making homeownership more accessible. Meanwhile, the retail sector will gain momentum from the return of mainland Chinese tourists and key developments like the opening of Kai Tak Sports Park. However, the office rental market faces ongoing challenges with weak demand and high vacancy rates.
Residential Sector Gains Momentum Amid Favorable Conditions
The residential market in Hong Kong is gearing up for a significant boost in 2025, supported by multiple positive indicators. A key factor is the anticipated reduction in interest rates, which will make mortgages more affordable for both buyers and investors. Additionally, the relaxation of transaction restrictions is expected to attract more participants into the market, further driving home prices upward. Residential rents are also on the rise, adding to the overall strength of the sector.
With interest rates projected to drop by 25-50 basis points in 2025, mortgage costs in Hong Kong will decrease, making it easier for individuals to purchase homes. This financial relief is likely to stimulate both primary and secondary home sales, contributing to a 6% increase in primary home sales from 2024 levels. Moreover, the removal of previous restrictions on residential transactions will encourage more buyers to enter the market, leading to a 3% rise in home prices. Residential rents are also expected to grow by 6% in 2024 and 4% in 2025, providing additional support to the housing market. Investors looking for opportunities in this sector can find attractive returns, especially with property stocks trading at a discount to net asset value (NAV).
Retail Sector Set for Revival with Boost from Tourism and Major Events
The retail sector in Hong Kong is poised for a revival in 2025, fueled by an influx of tourists and major events that will drive consumer spending. Key developments such as the opening of Kai Tak Sports Park will attract visitors and contribute to higher retail sales. The return of mainland Chinese tourists following the resumption of multi-entry visas for Shenzhen residents is another critical factor boosting retail performance.
Tourism is expected to play a pivotal role in revitalizing the retail sector. Visitor arrivals are forecasted to increase by 28%, providing a much-needed lift to retail sales. The reopening of borders and the issuance of multi-entry visas for Shenzhen residents will facilitate the return of mainland Chinese tourists, who are known for their substantial spending power. Retail sales value is predicted to grow by 5% in 2025, driven by this renewed tourist activity. Furthermore, the opening of Kai Tak Sports Park, which will host major events, will attract even more visitors and enhance retail opportunities. Strategic investments in retail properties, particularly those with strong exposure to tourism, position companies like Link REIT and Wharf REIC to capitalize on these trends. Despite these positive outlooks, risks such as unexpected interest rate hikes and weaker economic growth remain, but favorable policies and higher-than-expected tourist arrivals could provide additional impetus for market growth.