- Residential Market: The sustained low-interest-rate environment and wealth effects from a buoyant stock market have supported improved housing market sentiment, leading home prices to bottom out and strengthen by 1.8% year-to-date (as at October). Total residential transactions for the full year 2025 are expected to reach approximately 62,000 units. Transaction numbers in 2026 are forecast to remain broadly in line with this year’s level, with home prices projected to rise by up to 5%.
- Grade A Office Market: Rents stabilized in Q4 (as at mid-November), with the year-to-date decline narrowing to 4.1%, while net absorption reached 1.1 million sq ft. Rents are projected to fluctuate within a narrow range of ±1% in 2026, with Greater Central and Greater Tsimshatsui likely to outperform.
- Retail Market: Supported by rising tourist arrivals and more stable local consumption, retail sales performance continued to recover. The average high street vacancy rate fell further to 6.6% in Q4, the lowest since the pandemic, while high street rental performance remained more resilient in Central and Mongkok. Overall high street retail rents are anticipated to increase modestly in a range of 2% to 3% in 1H 2026.
- Capital Market: Market sentiment showed signs of recovery, driven by gradual interest rate cuts and attractive pricing across property sectors. Year-to-date transaction volume of non-residential big-ticket deals (>HK$100 million) recorded HK$34.0 billion (as at December 8). The rental housing sector is expected to retain strong growth potential in 2026.
Supported by a sustained low-interest-rate environment and wealth effects from a buoyant stock market, monthly residential transactions have exceeded 5,000 units for nine consecutive months, helping overall home prices to stabilize and show upward momentum. This positive trend is expected to continue into 2026. Meanwhile, the capital market has improved on the back of gradual interest rate cuts and attractive pricing across real estate sectors, with student accommodation and rental housing likely to remain sought-after. In the Grade A office sector, year-to-date net absorption recorded close to 1.1 million sq ft, with leasing activity more active in core districts. However, high availability will continue to weigh on overall rents, which are forecast to adjust within a narrow range of ±1% in 2026. As for the retail sector, overall retail sales have stabilized further, with the average high street vacancy rate continuing to decline. Overall high street retail rents are expected to see a modest increase in 2026.
Office Market Key Takeaways
- Underpinned by improved market sentiment brought on by a recovery in IPO activity and the stock market, Q4 net absorption reached 475,700 sf, the highest level since Q2 2019.
- Overall office rents in November edged up by 0.1% from September 2025, while Greater Central and Greater Tsimshatsui began to pick up in the same period.
- The recovery of the IPO market has supported positive market sentiment and downstream office demand from banking & finance and professional services firms.
- Rental divergence between prime office districts and other decentralized areas will become more pronounced. Landlords of new projects will need to offer further incentives to drive occupancy.
- We forecast the overall office rental level to fluctuate within a ±1% range in 2026, amid improved market sentiment although an abundant new supply pipeline.
Retail Market Key Takeaways
- Retail sales showed signs of stabilization, with monthly sales recording a y-o-y increase since May 2025, backed by improved tourist arrivals and more sustained local consumption.
- The overall retail industry vacancy rate has trended downwards for two consecutive quarters, suggesting recovering leasing demand.
- F&B sector rents remained under pressure, driven by high availability across semi-retail use floors in commercial buildings.
- We expect overall high street retail rents to pick up in a range of 2% to 3% in 1H 2026, although F&B sector rents are anticipated to soften by 1% to 3%.
- The Southbound Travel Scheme for Guangdong Vehicles is expected to bring higher footfall and greater tourist spending at signature malls and across the overall retail market.
Residential Market Key Takeaways
- Residential market sentiment continued to be strengthened amid rate-cut expectations and solid rental market demand.
- Home sales momentum sustained, with Q4 2025 residential S&P numbers expected to record a 9% increase y-o-y, bringing the 2025 total number to approximately 62,000 units, up 17% y-o-y.
- According to Cushman & Wakefield data, as at early December 2025, overall mass-market home prices have risen by around 3% y-o-y from 2024.
- Year 2026 transaction numbers are expected to be similar to the 2025 level of approximately 60,000 units.
- Year 2026 home prices are expected to rise by up to 5% y-o-y.
Capital Market Key Takeaways
- Investment sentiment strengthened in 2025, driven by gradual interest rate cuts and attractive pricing across asset sectors, with total consideration of HK$34.0 billion YTD (as at December 8 2025) up 11.1% from the full-year 2024 total.
- The softer pricing level has made the office sector attractive to end-users and long-term investors, especially for assets in prime locations.
- The market witnessed growing real estate asset demand from the education sector, seeking both office and retail assets for campus expansion.
- The living sector continued to be sought-after, comprising nearly one-fourth of the total number of deals, supported by proactive government initiatives.
- Full-year 2026 total investment volume is forecasted to grow to approximately HK$40 billion, chiefly driven by local and Chinese mainland capital.
