Hong Kong Property Market Forecast for 2026

Overall property prices had remained steady across Hong Kong for the year of 2025. Some sectors such as retail and commercial saw some pull back. Appreciation on rental yields in the residential markets and a slight reduction in interest rates helped to buoy prices. Reports of loan repayment issues arising from some institutional investors in the retail and commercial sectors and property developers taking a conservative outlook in expanding their land banks gives us market watchers a sense of where the market is at. 

So how do things look for Hong Kong's 2026 real estate market? 

John Maynard Keynes, a Cambridge man, came up with a relatively simple rule of supply and demand that remains relevant today in predicting price points in free-market economies. If supply outweighed demand then prices would fall and if demand outweighed supply then prices would rise. For the Hong Kong real estate market looking at the supply and demand curve has always been a good starting point for predicting where the market would go. 

The other factors that would influence property markeet to consider is interest rates and to a lesser extent extrinsic factors such as currency depegging, force majeure, disease, famine, political risks, war, etc. 

So let us look at the supply and demand curve where supply is sellers and demand is buyers. Sellers of properties can be grouped into 2 large categories - first-hand and second-hand. Supply of first-hand properties in the private sector are made up effectively of property developers only and in the public sector of public housing and HOS properties (Home Ownership Scheme) which are created by the government. Suppliers of second-hand properties are made up of individuals and investors looking to sell. Looking at the 1st category ie. first-hand properties in the private sector - there is estimated to be around 27,000 unsold first-hand properties as of the end of 2025 and approximately 104,000 units coming into the market in the next 3 years of which ~27,000 will hit the market in 2026. For the housing provided by the government an estimated supply of around 89,700 units will become available over the course of the next 3 years with around 31,800 units for the year of 2026. 

For the secondary market, outlined are some factors that precipitate private landlords to sell:- (i) those wishing to liquidate their position for whatever reasons, (ii) those who are looking to emigrate or repatriate to their home countries, (iii) those who bought property or properties on mortgage and have become unable to support their monthly payments (iv) those who pass away. 

The demand side is made up of:- (i) investors looking for capital gains, (ii) investors looking monthly rental yield, (iii) newly weds needing a new home and (iv) mainland Chinese buyers.

Investors looking for capital gains will buy when they think prices will go up and sell when prices go down. They come and go so they can be considered like an accelerator so when prices go up they will make them go up faster and vice versa for when prices go down; they should strictly not be considered real demand. Investors looking at monthly rental yield seek return on cash and whether they buy or not will largely be dictated by interest rates; last year the benchmark interest rate was 4% so net rental yields will need to be greater than that for this demand to be significant. This is because for the year of 2025 gross rental yield averaged at 3.5% for residential property in Hong Kong; after deducting agency fees, managements fees, decoration costs, government rates, stamp duty, periods of vacancy, etc. the net rental yield is closer to 3%. Given the transactional cost for purchasing, risk of capital depreciation, risk of encountering delinquent tenants, hassles dealing with contractors unless interest rates would go to well below 3% this demand would probably not be significant. 

There were ~42,000 marriages for the year of 2025 - assuming that 40% of them would remain in Hong Kong and purchase a property (an estimate provided by ONC Lawyers); this would create a demand of roughly ~17,000 homes. According to South China Morning Post Mainland Chinese accounted for ~13,000 property purchase transactions for 2025 accounting for 25%-30% for all property transactions. This percentage although is very significant is actually a decline from 10 years ago and it has been postulated that it is due to more barriers being put in place to convert RMB to HKD.

There were ~50,000 deaths and ~31,000 births recorded respectively for the year of 2025 and ~18,200 new immigrants to Hong Kong, the population effectively remains steady with a very small decline which is a positive sign because any major population increases or decreases would result in dramatic changes in the supply/demand curve for property. 

There were around 18,000 transactions for the purchase of first-hand property for the year of 2025. For 2026, there will be ~27,000 new homes coming onto the market in the private sector. There is ~27,000 unsold first-hand properties leftover from 2025. For 2026, let us assume that the demand for first hand properties remains constant at ~18,000 for 2026, this would mean there will be another ~9,000 unsold first-hand properties by the end of 2026. With the cost of borrowing being higher compared to the last 2 decades developers would likely slash prices to try to move unsold stock and reduce loan exposures. This would weigh on the secondary market and negatively impact valuations. Secondly, not only would the unsold stock from 2025 not be cleared another ~9,000 units would be added to this total which means unsold units would reach ~36,000 by the end of 2026. Given the cost of servicing loans, developers may slash prices aggressively to move unsold stock which could spill over into the secondary market. 

Interest rates are in many ways the ultimate determinant of where the property market will head this year. If it went to 0% property prices would almost be guaranteed to rise and if it went to 5% fall. Benchmark Interest rate for the USD, and thus HKD, is ~3.75%; it is expected that the most it would drop for the year is 2 quarter points taking it to ~3.25%. At ~3.25% the cost of servicing debt would not change significantly for developers. They would still be motivated to move unsold properties. For investors wishing to derive rental yield to get into the market 3.25% would not be low enough to motivate them to buy because they would get a higher return leaving funds in fixed deposits than they would converting their cash into property. 

Given the pressures from the primary market coupled with the expected interest rates for the year, we predict that the residential prices would either stay flat or fall by a maximum of 10% for the year of 2026.  In Hong Kong, ~60%-70% of home owners own their residential properties outright and do not owe banks any loans - so any decline in the residential property market would be slow.