Mainland Chinese demand to help drive up home prices in 2025

In contrast, the outlook for the office rental market remains challenging.

Hong Kong’s home prices are expected to rise by 3% whilst transactions will rise by 6% in 2025, partly due to demand from mainland Chinese, according to a sector note by securities firm CGS International.

Authorities’ relaxation of all tightening measures on residential transactions, and positive cost of carry suggest that it is better to purchase than to rent, will help drive up prices and transactions.

CGS International also expects strong demand from mainland Chinese who live in Hong Kong.

“We estimate their total housing demand in the next 5-10 years could be [five times] Hong Kong’s annual primary sales volumes in 2024F,” said CGS International analysts Raymond Cheng, Will Chu, and Steven Mak in a sector note published on 30 December 2024.

Cheng, Chu, and Mak expect primary home sales to rise by 38% YoY to 15,600+ units sold in 2024F and further increase by 6% YoY to 16,600 units sold in 2025F.

The recovery of retail sales will help drum up activity in the retail property market.

Whilst retail sales are projected to fall 7% YoY in 2024F, this trend could reverse to a 5% YoY growth this year, the analysts said.

Factors that could push up retail sales include the multi-entry visas for Shenzhen residents, which could attract 11 million visitors to Hong Kong in 2025.

The opening of Kai Tak Sports Park, which has 50,000 seats, may also attract more visitors. CGS International projects that it will host 30 to 40 mega events per annum.

Visitor arrivals are expected to increase by 28% YoY to 56.1 million.

In contrast, outlook for the office rental market remains challenging.

“Demand from Chinese and foreign corporations has been scant since 2022 due to weak economic growth in China and mediocre capital market performance in HK,” the analyst said.

The increase in supply of GradeA office is likely a drag on office rental rates, they added.

“We expect Grade-A office vacancy rate to stay at 13-14% in 2025F-26F and market-wide office rents to fall 5% p.a. in 2025F-26F,” they said.

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