Sing well about the Hong Kong real estate market! Property prices will rise by 7% each in the next two years!

1、 The downward cycle of interest rates has begun, and mortgage costs continue to decrease

The decrease in interest rates is the core catalyst supporting the rise in property prices, and it is also the primary factor emphasized in the HSBC report. In 2025, the Hong Kong Monetary Authority will follow the pace of the Federal Reserve's interest rate cuts, reducing the benchmark interest rate by 75 basis points throughout the year. Currently, the prime rate has dropped to the range of 5% to 5.25%, returning to the level before the 2022 interest rate hike. The market generally expects that there is still room for the Federal Reserve to cut interest rates three times in 2026, and the Hong Kong Monetary Authority is expected to follow suit by further lowering the benchmark interest rate to around 3.25%. Mortgage borrowing costs will continue to decline.

The decrease in borrowing costs directly activates the demand for real estate, especially for the first-time and improvement oriented groups. Based on a residential property with a total price of HKD 10 million and a 30-year mortgage with a down payment of 30%, the interest rate has decreased from 5.25% to 3.25%, resulting in a reduction of approximately HKD 38000 in monthly payments and a total interest expense savings of over HKD 1.36 million, significantly lowering the threshold for home ownership. At the same time, banks have increased their support for the real estate market, not only relaxing mortgage approval conditions, but some banks have also launched low interest discount packages, further loosening the liquidity of the real estate market.

2、 Wealth effect combined with population inflow, continuous increase in demand on the demand side

The wealth effect generated by the improvement of the financial market has become an important support for the demand of the real estate market. In 2025, the Hong Kong stock market will emerge from a structural bull market, and the profit growth rate of the Hang Seng Index will rebound. The net purchase amount of southbound funds for the whole year will exceed HKD 1.4 trillion, driving residents' wealth appreciation and thereby enhancing their confidence and purchasing power in home ownership. Many investors, after making profits in the financial market, allocate some of their funds to real estate, especially high-quality residential properties in core areas, driving up the activity of real estate trading.

Population growth provides long-term momentum for the demand side. The population of Hong Kong has ended the continuous downward trend for several years, and the permanent resident population has rebounded to 7.5361 million in 2023, maintaining positive growth since 2024. This trend is attributed to the significant achievements of the Hong Kong government's talent introduction program - since the end of 2022, over 300000 residents have arrived in Hong Kong through various talent programs. In addition, with the return of foreign nationals and the influx of labor, the demand for housing continues to expand. Financial Secretary Paul Chan previously stated that some of these newly arrived talents will be "sublet to buy", further unleashing rigid housing demand and injecting healthy vitality into the real estate market.

3、 Supply decline and imbalance, real estate developers seize the initiative in pricing

The change in supply and demand pattern provides space for the rise of property prices. The HSBC report points out that the expected decline in residential supply will give real estate developers greater pricing initiative. Although the long-term housing strategy announced by the Hong Kong SAR government shows a total housing supply target of 420000 units from 2026 to 2036, the short-term supply pace has become a trend to slow down. Data shows that in the next five years, the average annual production of private residential units will be about 19100, while market demand continues to rise, and the supply-demand gap is gradually becoming apparent.

Against the backdrop of tight supply, high-quality residential properties in core areas are becoming increasingly scarce, opening up room for real estate developers to raise prices. In 2025, the Hong Kong real estate market has shown a trend of "both quantity and price rising", with particularly active transactions in first-hand luxury homes. The transaction volume of luxury homes exceeding HKD 100 million at the beginning of 2026 has doubled year-on-year, confirming the market's pursuit of high-quality properties. As supply tightens further, this structural upward trend will continue, driving overall property prices to steadily rise, echoing HSBC's forecast of a 7% annual increase.