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Peggy Ye

Morgan Stanley upgraded Hong Kong’s property sector to “attractive”, noting that an all-round improvement in the city’s economy and a policy-driven recovery will continue to push prices higher this year.
The US investment bank forecast home prices to rise around 10 per cent in 2026, with further gains expected in 2027, pointing out that the ongoing rebound marks the start of a new upcycle.
“We expect all three sub-segments – Hong Kong residential prices, Central office rents and retail rents – to record positive year-on-year growth for the first time since 2018,” Morgan Stanley said in a report on Monday.
Hong Kong’s lived-in home prices rose for a sixth straight month in November, lifting the official price index to a 16-month high and translating into a 3.5 per cent cumulative rise in 2025, according to government data. In the office market, prime Central rents rose 1.6 per cent in the fourth quarter, while vacancy rates across core districts had improved since midyear according to Cushman.

The housing recovery that began in mid-2025 was partly driven by a drop in borrowing costs, but lingering weakness in China’s property sector and global economic uncertainty continue to weigh on sentiment.
As for offices, property consultancy CBRE said the vacancy rate was likely to remain high as new supply comes on stream. Banks, too, remained cautious on lending as bad loans were at a high level compared with other global developed markets.
“We expect the office vacancy rate will further climb up to almost 18 per cent and rents will decline about 3 per cent in 2026,” said Ada Fung, chief operating officer for advisory services at CBRE.
Morgan Stanley said that while headwinds persisted, they no longer defined the market’s direction. The bank said it made the forecast largely on the complete removal of additional stamp duty in February 2024, which allowed foreign and mainland Chinese buyers to purchase and sell property without penalty.
“This will invigorate the market with animal spirits in 2026,” the bank said, adding that this had altered demand dynamics in a market where capital controls in mainland China often pushed wealth offshore.
That policy shift has been reinforced by improving macro conditions. The US Federal Reserve cut rates by 1.75 percentage points over the past 18 months, making it easier for mortgage buyers. Net immigration from the mainland doubled to around 140,000 people a year, reversing a population decline, while a strong equity rally – with the Hang Seng Index gaining 28 per cent in 2025 – boosted household wealth.
Mainland buyers accounted for about 25 per cent of the total primary and secondary home transactions as of September, Morgan Stanley said, citing data from Centaline Property Agency. After the deep correction, Hong Kong homes now offered higher rental yields than China’s tier one cities, it added.
For offices, the bank expected grade A rents in Central to rise 3 per cent in 2026, driven by a flight to quality and limited new supply, even though rents remained about 30 per cent below peak levels.
The retail sector, which faces headwinds from online shopping and competition from Shenzhen, was expected to see a 3 per cent increase in shop rents, supported by rising mainland visitors.
Reflecting its outlook, Morgan Stanley favoured developers and landlords with strong balance sheets and dividend prospects.
It kept Sun Hung Kai Properties and Henderson Land overweight as key beneficiaries of a residential upcycle, and upgraded CK Asset and Swire Properties to overweight on net cash positions, asset disposals and improving office fundamentals.
Hongkong Land and Hang Lung Properties were also rated overweight. It raised Hysan Development to equal-weight on market share gains and deleveraging.
The bank remained underweight on New World Development and Wharf Holdings, warning of liquidity pressure and weak dividend prospects, noting New World’s shares could fall as much as 50 per cent in a bear case.
For 2026, the bank expected developers to launch 14,000 to 15,000 units, in line with recent averages, and said there was room for mild price increases, with location and product quality being the main factors.


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Hong Kong property

Morgan Stanley lifts Hong Kong property to ‘attractive’, with rebound to extend into 2027

Hong Kong’s property sector is at the beginning of an upcycle, with prices likely to trend higher this year, according to Morgan Stanley. Photo: Dickson Lee

View of Mid-Levels from Two Pacific Place. Photo: Jonathan Wong

Hong Kong home sales hit 6-month high in December on demand for affordable units

People walk past a private residential estate in Kai Tak. Hong Kong property sales ended the year on a high in December. Photo: Jelly Tse

Prospective homebuyers are seen at Early Light International’s sales office during the launch of the second phase of the Gold Coast Bay residential project in Tuen Mun on November 15, 2025. Photo: Dickson Lee

Hong Kong home prices rise for sixth consecutive month, setting stage for 2026 rebound

Home prices extend a recovery that began in the second quarter. Photo: Sam Tsang

Rising prices are supported by expectations of further interest-rate cuts, easing US-China trade tensions, a rebound in the stock market and strong new-home sales, analysts say. Photo: Dickson Lee

Hong Kong developers test demand for ultra-luxury homes with new launch on The Peak

Wharf Holdings’ latest Plantation Road launch reflects how developers are encouraged by improved market sentiment, following a number of big-ticket transactions this year. Photo: Handout

A view of luxury homes at 35a Mount Kellett Road on The Peak, overlooking Aberdeen and South Horizons on Hong Kong Island. Photo: SCMP

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City’s home prices are expected to rise around 10 per cent in 2026, with an ongoing rebound heralding the start of a new upcycle


City’s home prices are expected to rise around 10 per cent in 2026, with an ongoing rebound heralding the start of a new upcycle.


Morgan Stanley lifts Hong Kong property to ‘attractive’, with rebound to extend into 2027

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}City’s home prices are expected to rise around 10 per cent in 2026, with an ongoing rebound heralding the start of a new upcycle

City’s home prices are expected to rise around 10 per cent in 2026, with an ongoing rebound heralding the start of a new upcycle