| [28 February 2025] Hong Kong home prices expected to bottom out in early 2025 Knight Frank’s latest Hong Kong Monthly Report highlights varied property market performance. The finance sector in the Hong Kong office market showed optimism, some luxury goods companies were also active with consolidation and upgrading, but the vacancy rate for Grade A office spaces is expected to remain high due to new supply. The Kowloon office market exhibited subdued activity in January 2025, with most activity focused on lease renewals, and demand is expected to remain weak. Hong Kong residential home prices declined in 2024, but prices are expected to recover in 2025. The retail market saw a drop in total retail sales in 2024. However, with the opening of the Kai Tak Sports Park, which will boost both local and tourist consumption, retail sales are expected to stabilise in 2025. Grade A Office Hong Kong Island At the beginning of the year, the activity level in Hong Kong’s office market was high, despite the absence of major transactions thus far. In January, the office market witnessed continued optimism within the finance sector, with hedge funds leading the charge. We have observed an uptick in leasing inquiries and inspections in January. Some luxury goods companies were also active with consolidation and upgrading projects, leveraging the market downturn to negotiate favourable lease terms and upgrading their office spaces. Looking ahead, the vacancy rate for Grade A office spaces is expected to remain high due to the continued influx of new supply. Despite these challenges, there are encouraging signs of improvement in leasing activities, particularly within the finance sector. The trend toward higher-quality office spaces is likely to continue as businesses consolidate. Kowloon The Kowloon office market exhibited subdued activity in January 2025, largely due to the festive season. Although new lease transactions rose by 30% MoM, this was primarily due to a low base from December. Most market activity focused on lease renewals, especially in Kowloon East. The lack of notable new lettings suggests many businesses postponed relocation decisions during the festive season. Some larger deals, exceeding 10,000 sq ft, are still in negotiations. On the other hand, some companies are opting to renew existing leases, often downsizing their spaces by 10% to 15% to align with current operational needs. This trend is particularly evident in the manufacturing, trading, and sourcing sectors as businesses optimise workflows and reduce staff requirements. Overall, we expect demand in the Kowloon office market to remain weak in the near term. Nonetheless, with projections of less than 1 million sq ft of new office supply within 2025, it may lead to a faster net take-up rate, suggesting rents are unlikely to decline significantly in 2025. Residential Hong Kong home prices halted their rebound trend over the last quarter of 2024, declining by 0.65% MoM in December, recording a total annual decline of 7.1%, according to the Rating and Valuation Department. Developers have aggressively put more new projects on the market at discounted prices, capitalising on the improving sentiment. As we entered a new year, a number of first-hand projects recorded satisfactory sales. The luxury residential segment remains stable. One of the most notable transactions in the month occurred at The Peak, where a 5,062-sq-ft house at 77 Peak Road sold for HK$501 million (or HK$98,652 per sq ft). The luxury leasing market also shows stable movement. Notably, affluent individuals from the mainland could afford premium accommodation with monthly rents up to HK$200,000. In the short term, property prices are expected to remain at their current low levels. As interest rates and inventory levels gradually decrease, coupled with an improved stock market stimulating market sentiment, we expect property prices to begin to recover noticeably in the second half of the year. We forecast an overall annual increase of up to 5% for 2025. Retail The retail market continues to show weakness, with total retail sales dropping by 7.3% in 2024 compared to the previous year. The unfavourable macroeconomic environment in 2024, the surge in northbound travel of locals, and the decline in tourist spending were different drivers behind this disappointing sales drop. Among the various types of retail outlet, the substantial declines in consumer durable goods and jewellery, watches, clocks, and valuable gifts categories highlight the adverse impact on consumer appetite amid challenging economic conditions. Despite a 14.1% YoY drop in retail sales of bread, pastry, confectionery, and biscuits in 2024, certain pastry and cookie retailers have successfully navigated the challenges. With the opening of the Kai Tak Sports Park and related mega sports and entertainment events to boost both local and tourist consumption, the government estimates the project to attract over 840,000 visitors and bring over HK$3.3 billion spending in Hong Kong. Total retail sales are expected to stabalise in 2025. Although the retail and macroeconomic landscape has not fully recovered, opportunities remain for SMEs to make their market and stimulate market growth. |
Knight Frank: Hong Kong home prices expected to bottom out
28 February 2025
More Real Estate
Regarding the government’s land sale programme for the 2025/2026 fiscal year mentioned in the Budget, Kathy Lee, Head of Research and Retail Consultancy at Colliers Hong Kong, has the following response: Kathy Lee, Head of Research & Retail Consultancy commented, “In the Budget, the Financial Secretary stated that the government plans to release 11 residential sites, [...]
Regarding the Government’s 2025/26 Land Sale Programme, Hannah Jeong, Head of Valuation & Advisory Services, CBRE Hong Kong: The decision to delay the development of the two Multi-storey Buildings for Modern Industries (MSBs) is unavoidable given the sluggish land market and uncertain land conditions from the government. The MSBs are intended to accommodate brownfield operators, [...]
Prime location in prestigious residential neighbourhood with significant potential for renovation and redevelopment Hong Kong, 19 February 2025 – JLL has been appointed as the Sole Agent by the vendor for the sale of Jade Beach Villa at 3-7 Horizon Drive, Chung Hom Kok (the “Property”). The Property is valued at approximately HKD 1.5 billion. It is currently the only and largest [...]
(23 January 2025, Hong Kong) In 2024, approximately 98.3% of Grade A office net absorption originated from the five key submarkets: Central, Wanchai/ Causeway Bay, Hong Kong East, Tsimshatsui and Kowloon East, according to JLL’s latest Hong Kong Monthly Market Dynamics report released today. This trend highlights the increased attractiveness of major business districts to tenants [...]
(15 January 2025, Hong Kong) Leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) has released its 2025 Market Outlook report, highlighting diverse performance across various sectors in the commercial property market. The report anticipates positive developments in small-sized office leasing activity, particularly among private banks and [...]
(8 January 2025, Hong Kong) 2024 was a challenging year for Hong Kong’s commercial real estate market across different sectors. The slow economic recovery in mainland China, coupled with looming new office supply, high interest rates, and weak retail sales, hindered market recovery. Investors and corporate occupiers remained largely cautious. Investment deal flow and office leasing volume [...]
Knight Frank’s latest Hong Kong Monthly Report highlights varied property market performance. The Hong Kong office market faces challenges with high vacancy rates, though demand for high-quality spaces is increasing. In Kowloon, oversupply is leading to subdued activity and a projected mild rental decline in 2025. After a five-month decline, Hong Kong residential home prices rose in [...]
(11 December 2024, Hong Kong) Hong Kong’s commercial and residential markets continued to consolidate in 2024 amid high vacancy rates and weak economy. However, the removal of cooling measures in the housing market and the recent rate cuts have boosted market activity. Cathie Chung, Senior Director of Research at JLL, said: “In 2025, the market will still face oversupply issues [...]
(4 December 2024, Hong Kong) Comparing the available private residential housing supply (number of approved pre-sale consent and unsold units in completed projects) to primary transaction volume over the past 12 months, the months of supply has dropped to 78.2 months as of October 2024 from its peak at 101.6 months. New home inventory will approach a more balanced supply and demand level by [...]