The outlook for Hong Kong's property market is looking up, with JPMorgan's analyst Chan predicting a path to recovery. Chan stated that while stable growth seems possible, the long-term health of the sector is closely tied to the performance of the Chinese economy, which still needs time to rebound.

If the Hong Kong stock market continues its upward trajectory into next year, this could lay the groundwork for a significant rebound in home prices by 2026. Chan estimates that prices could rise between 3% and 5% during that period.

Challenges in the Commercial Sector

Turning to the commercial real estate landscape, Chan pointed out that a concerning 34% of the interest-bearing debts among Hong Kong's listed developers are classified as high risk. This situation could lead borrowers to seek payment deferrals or renegotiate loan terms, although many owners may have personal assets to finance their needs.

Despite these challenges, Chan expressed confidence that systemic liquidity risks are limited, indicating a certain resilience in the market.

Prospects for Office Spaces

Looking at the office market, Chan noted potential ongoing challenges, with negative rental trends possibly persisting through 2026. He highlighted that 2027 might mark a significant inflection point, contingent on further observation of net absorption rates.

Encouraging signs have emerged, with office leasing in Hong Kong showing an upward trend for the fourth consecutive month in July. Recent reports indicate that tenants leased a net 190,000 square feet of prime office space, contributing to a total net absorption of 463,000 square feet from April to July.

Nonetheless, grade A office rents continued to decline, down 0.5% from the previous month and over 40% since their 2019 peak, with an additional decline of around 5% expected for the rest of the year.

Retail Market Stabilizing?

In the retail sector, optimism is in the air as Chan believes the market is stabilizing. Positive performances in the stock market and the tapering trend of Hong Kong consumers spending in Shenzhen indicate a healthier retail environment ahead.