Overview

A new report from CGS International reveals that Hong Kong's residential property market is poised for a significant rebound in 2025, fueled by a surge in demand from mainland Chinese buyers. The analysis anticipates a 3% increase in home prices and a 6% rise in transactions by the end of this forecast period, marking a recovery from previous market stagnations.

Market Drivers

The anticipated flourishing of the real estate market is tied to the Hong Kong authorities' recent decisions to ease restrictions on residential transactions. Analysts note that these measures will encourage more people to buy rather than rent, further stimulating the market.

Demand from Mainland Chinese Buyers

Leading the charge are estimates suggesting that the demand for housing from mainland Chinese residing in Hong Kong could be staggering — potentially five times the annual primary sales volumes projected for 2024. This insight comes from a team of analysts at CGS International, including Raymond Cheng, Will Chu, and Steven Mak. They predict that primary home sales could jump by 38% year-on-year to over 15,600 units sold in 2024, and continue to increase by 6% more to 16,600 units in 2025.

Retail and Tourism Outlook

Retail sales are also expected to bounce back, contributing positively to the retail property sector, with growth projected to recover from a previous 7% decline to a 5% increase within the same year. Key factors driving this recovery include the introduction of multi-entry visas for Shenzhen residents, which could draw approximately 11 million visitors to Hong Kong in 2025. The much-anticipated opening of the Kai Tak Sports Park, with a capacity of 50,000 seats, is set to host 30 to 40 major events annually, further enhancing tourist attraction.

Office Rental Sector Outlook

In stark contrast to the residential market's buoyancy, the outlook for the office rental sector remains bleak. The report highlights weak demand from both Chinese and foreign businesses since 2022, attributing this to sluggish economic growth in China alongside a lackluster capital market performance in Hong Kong. Office rental rates are predicted to decline further, with vacancy rates for Grade-A office spaces expected to stabilize between 13-14% in 2025-2026, causing rents to drop by about 5% per annum.

Conclusion

As Hong Kong navigates this complex landscape, the dynamics of demand from mainland Chinese buyers will undoubtedly play a critical role in shaping the future of its real estate market.