Interest reduction dividends combined with wealth effects! Hong Kong property prices hit bottom and rebounded!

The recovery in Hong Kong's property market continues to consolidate. Driven by the dual resonance of interest rate cuts spurred by falling US rates and the wealth effect generated by the robust performance of Hong Kong stocks, pent-up demand for property has accelerated. Property prices have successfully bottomed out and rebounded, with market confidence undergoing comprehensive restoration.

Data indicates that Hong Kong's residential property price index rebounded cumulatively by 3.3% between March and October. Year-to-date, the Midland Price Index has recovered approximately 4.65%, marking a 6.18% rebound from its annual low. This series of positive signals signifies that Hong Kong's property market has formally exited its adjustment phase and entered a trajectory of steady recovery.

The sustained release of interest rate reduction benefits has directly lowered property acquisition costs, serving as a key driver in revitalising the market. Influenced by the transmission of falling US interest rates, Hong Kong's mainstream H-rate mortgage interest rates have gradually declined from a high of 4.5% to around 3.8%. The substantial reduction in mortgage repayment burdens has prompted many first-time buyers and those seeking to upgrade their homes to reconsider their property purchase plans. For ordinary homebuyers, the rate cut translates into tangible savings: taking a HK$4 million compact flat as an example, with a 70% mortgage loan of HK$2.8 million over 30 years, the monthly repayment decreases by approximately HK$1,100 when the interest rate drops from 4.5% to 3.8%. For an HK$8 million property upgrade, the monthly savings could reach around HK$2,200. This reduction in monthly mortgage burdens of HK$1,000 to HK$2,500 significantly lowers the barrier to entry and eases repayment pressures for existing homeowners.

This interest rate reduction dividend resonates with the wealth effect generated by the robust performance of Hong Kong stocks, further igniting market enthusiasm for property acquisition. Concurrently, the impressive showing of Hong Kong equities has driven appreciation in residents' assets, with total bank deposits in Hong Kong surpassing HK$19 trillion, gradually revealing the wealth effect. Many citizens, having seen their assets appreciate, have turned to property as a key asset allocation choice for preserving and growing wealth. This has accelerated the release of pent-up demand for both upgrading and investment properties. ‘Having previously held back due to concerns over market adjustments, I seized the opportunity this year when Hong Kong stocks delivered solid profits and mortgage pressures eased, promptly purchasing a three-bedroom flat in Tseung Kwan O,’ remarked Mr Chan, whose property acquisition experience is representative. He noted that many friends had similarly capitalised on this wave of benefits to upgrade their homes.

This dual positive momentum has directly propelled property prices to bottom out and rebound, with various indicators showing positive trends. Data from the Rating and Valuation Department indicates that the residential property price index has stabilised since March, accumulating a 3.3% rebound by October and achieving steady monthly increases. The more market-reflective Midland Price Index has demonstrated even stronger performance, rising approximately 4.65% year-to-date. Compared to its annual low, the rebound has reached 6.18%, fully confirming the market's recovery momentum. From a transaction structure perspective, not only has the previously buoyant affordable property market maintained its momentum, but transactions for improvement-type properties have also heated up simultaneously. This has formed a ‘full-chain recovery’ pattern, further consolidating the foundation for property price recovery.

The bottoming out and subsequent recovery of property prices has spurred a comprehensive restoration of market confidence, creating a virtuous cycle of rising volumes and prices. According to Midland Realty Group statistics, Hong Kong's residential property transactions have risen steadily throughout 2025. The primary market is projected to achieve a record-high annual transaction volume of 20,000 units, while the secondary market is expected to reach approximately 46,000 transactions, both representing significant year-on-year growth. Developers' enthusiasm for launching new projects has simultaneously increased, with multiple new developments achieving ‘sold out’ status or high absorption rates amid market fervour, further validating the genuine vitality of market demand. Analysts from Jones Lang LaSalle note that the overall sentiment in Hong Kong's residential market has improved and stabilised, with accumulated purchasing power continuing to be released, providing solid support for property price recovery.