The revitalized Alibaba starts to "buy the dip" in the Hong Kong real estate market.
Author | Wang Hanyu
Editor | Zhang Fan
Recently, market news reported that Alibaba is in talks to acquire One Island South in Causeway Bay, Hong Kong, at a price of approximately HK$7 billion. If the deal is finalized, the Hong Kong office of this tech giant will move from the currently rented Times Square to this new landmark in Causeway Bay that it owns.
Mainland Chinese companies' purchases of properties in Hong Kong may, to some extent, indicate that the attractiveness of Hong Kong's real estate market is recovering.
Hong Kong's stock market has released its "money - attracting ability" earlier than the property market. From the influx of south - bound funds at the beginning of the year, which drove the Hong Kong stock market to lead the global gains, to the accelerated return of global foreign capital in July. As of October 10, the Hang Seng Index has risen by 54.22% this year, and the Hang Seng Tech Index has soared by 66.29%.
Looking back at the historical index trends, we can also find that Hong Kong's stock market often leads the property market. According to Wind data, since August 2015, the Centaline City Leading Index, which represents Hong Kong's property market prices, has generally moved in tandem with the Hang Seng Index, and the former usually lags behind by several months.
Comparison of the trends between the Centaline City Leading Index and the Hang Seng Index. Source: Wind
Currently, the Hang Seng Index has entered a new upward cycle, and there have been frequent reports of mainland Chinese and foreign capital bottom - fishing in the real estate market. Will this drive Hong Kong's property market towards stability and even recovery?
Both rents and property prices in Hong Kong are rising. Is Alibaba buying a building to lock in costs?
The One Island South that Alibaba is reported to be interested in is located at 281 Gloucester Road. It is a 24 - story Grade A office building owned by the Mandarin Oriental Hotel Group. The total area of this office building is approximately 500,000 square feet, with about 55,000 square feet of retail space, and each floor has an area of over 20,000 square feet.
According to market news, Alibaba is in talks to acquire the top 13 floors of this office building, with a total area of approximately 270,000 square feet. Based on the transaction price of HK$7 billion, it is equivalent to HK$26,000 per square foot.
If the deal is completed, Alibaba will break away from the tradition of most mainland Chinese companies renting offices in Hong Kong and become a property owner overnight.
Given the current trends of rising residential rents and property prices in Hong Kong, increasing demand for office leasing, and narrowing rent declines, a one - time "buyout" means that Alibaba can hold office properties at the current relatively low prices and capital costs and resist potential future rent increases.
On the 8th of this month, Siu Leung - fai, the Managing Director of DTZ Hong Kong, mentioned that the net absorption and new lease transactions of Grade A office buildings in Hong Kong remained active in the third quarter of this year. There will be no new projects completed in the Hong Kong office market in the next two to three years, and it will enter a period of inventory and new supply digestion. Among them, the Central District office market performed the best, with the rent decline further narrowing in the third quarter.
Regarding the private residential market, Hong Kong's property prices have risen steadily for four consecutive months.
In September, the latest data from the Rating and Valuation Department of Hong Kong showed that the private residential property price index in Hong Kong reached 287.9 points in July, a month - on - month increase of 0.4%, and it has risen for four consecutive months, with a cumulative increase of over 1%. This is the second time since January - April 2023 that the index has seen a "four - month consecutive increase" phenomenon.
Hong Kong's rent levels are even more resilient, having risen for eight consecutive months as of July. The rent index reached 196.3 points in July, approaching the historical high of 200.1 points in August 2019.
In July 2025, Hong Kong's residential rent index soared to 196.3 points, rising for eight consecutive months and reaching a new high in nearly six years. The private residential rent index has risen for seven consecutive months. The vacancy rate of properties near subway stations is generally below 3%, and the rent return rate in some areas can reach 4% - 5%, forming a positive cycle of "rents supporting prices and prices rising steadily".
According to Huatai Securities' statistics, the rent return rate of Hong Kong's residential properties had entered an upward channel. As of March 2025, the rent return rates of Class A (small units) to Class E (large luxury units) were 3.7%, 3.2%, 2.8%, 2.6%, and 2.4% respectively. At that time, the mortgage interest rates of some banks were as low as 2%.
Source: Huatai Securities Research Institute
A rent return rate higher than the mortgage interest rate means that the rent - to - sales ratio of Hong Kong's real estate market has been further restored, forming a pattern of "buying is cheaper than renting". This change has improved the investment properties of real estate and laid the foundation for the subsequent release of market demand and recovery.
Against this background, the news of Alibaba bottom - fishing in the real estate market is like a shot in the arm for Hong Kong's property market.
The "resonance between the stock and property markets" may reappear
Similar to the positive signals released by large companies' bottom - fishing, since September 2024, the overall upward trend of the Hong Kong stock market has also released a catalyst for the stabilization of the property market.
On the one hand, with the recovery of the Hong Kong stock market's IPO and the financial industry, the demand and leasing momentum of Hong Kong's Grade A office buildings have increased in the first three quarters of this year. As the core of Hong Kong's economy, the financial industry accounts for more than 50% of the office leasing market. The improvement of this industry can drive the leasing demand of other industries.
On the other hand, and more importantly, looking back at previous bull markets of the Hang Seng Index, they have always driven the continuous prosperity of Hong Kong's real estate market later.
For example, during the economic recovery period after the SARS in 2003, the Hang Seng Index rose from 8,634 points in March 2003 to 31,353 points in October 2007, a gain of 263%. The year - on - year growth rate of private residential transaction volume turned positive seven months later, and the year - on - year growth rate of property prices rebounded 11 months later.
Comparison of the recovery rhythms of Hong Kong's stock and property markets during the post - SARS recovery period. Source: Huatai Securities Research Institute
Comparison of the recovery rhythms of Hong Kong's stock market and property prices during the post - SARS recovery period. Source: Huatai Securities Research Institute
Another example is during the QE monetary easing cycle in 2009. Five months after the Hang Seng Index hit bottom, the property market transaction volume began to rebound, and eight months later, the year - on - year growth rate of property prices turned positive.
Comparison of the recovery rhythms of Hong Kong's stock and property markets during the QE monetary easing cycle. Source: Huatai Securities Research Institute
Comparison of the recovery rhythms of property prices during the QE monetary easing cycle. Source: Huatai Securities Research Institute
Based on the comparison of index trends in several cycles, Huatai Research believes that there is a linkage between Hong Kong's stock and property markets, and the rise of the Hang Seng Index often precedes the recovery of property market transaction volume and prices.
Currently, this pattern seems to continue.
Since September 2024, the Hong Kong stock market has generally seen a valuation recovery, and the Hang Seng Index has risen by more than 44%. The private residential property price index in Hong Kong has also been rising continuously since March this year.
Chan Wing - kit, the Vice - Chairman of the Asia - Pacific Region and the President of the Residential Department of Centaline Property, said that the Hong Kong stock market has been performing strongly recently, the Hang Seng Index has rebounded, investors' confidence has returned, and capital has become more fluid. Naturally, the property market can catch a "ride".
DTZ predicts that the transaction volume of the Hong Kong property market is expected to reach 58,000 to 60,000 cases in 2025, and the property prices are expected to stop falling and rise by up to 2% throughout the year.
Is it time to buy a property in Hong Kong?
Driven by the active stock market, there are three driving factors for the subsequent recovery of Hong Kong's property market: the wealth effect brought by the stock market, the supply - demand structure, and the interest rate level.
Firstly, with the valuation recovery of the Hong Kong stock market, more Chinese concept stocks, mainland Chinese tech stocks, and consumer stocks have chosen to list in Hong Kong, further boosting the activity of the Hong Kong stock market. In the first half of 2025, the IPO financing amount of the Hong Kong stock market regained the top spot globally. The wealth effect brought by the capital market spills over to the property market, and it is expected to form a positive cycle of "active stock market - capital inflow - property market recovery".
Secondly, in terms of supply and demand, from the perspective of the land supply by the Hong Kong government, the land area sold by the Lands Department from January to February 2025 was nearly 60,000 square meters, exceeding the total for the whole of 2023. The high - level total supply reflects an improvement in the demand recovery and digestion speed.
More importantly, regarding the core variable affecting Hong Kong's property market, the interest rate trend has clearly pointed to a "long - term decline". Due to Hong Kong's linked exchange rate system, HIBOR interest rates of different terms are all dominated by the US Federal Reserve's monetary policy. In 2025, the Federal Reserve has been continuously cutting interest rates, and the trend of continuous rate - cuts in the future is obvious.
In terms of property prices, DTZ statistics show that by September, the asking price per square foot of second - hand properties in Hong Kong had rebounded to HK$12,500, a slight month - on - month increase of 0.02% compared to August.
Meanwhile, the improvement in property market transaction data is more obvious. In the first eight months of this year, the transaction volumes of new and second - hand properties in Hong Kong were 13,000 and 27,000 units respectively, with year - on - year increases of 13.9% and 13.8% respectively. In September alone, the registration volume of second - hand residential properties in Hong Kong reached 3,351 cases, a month - on - month increase of 29.3%.
The property market sales show a trend of "rising volume and prices", and the rent levels in Hong Kong have already rebounded to historical highs. By August this year, the rent levels in the three major districts of Hong Kong had generally exceeded the peak in August 2019.
Data source: Rating and Valuation Department of Hong Kong, Wind
Notably, since the end of 2024, the rent increase in the New Territories, which traditionally has the lowest rents, has gradually exceeded that of Hong Kong Island and Kowloon. The reason is that the "Quality Migrant Admission Scheme" of the Hong Kong government last year attracted a large number of mainland Chinese talents and overseas students, resulting in strong rental demand in areas such as Tai Wai and Yuen Long in the New Territories. At the same time, the local new supply is limited, and the supply - demand imbalance has pushed up the rents in the New Territories.
However, in terms of rent return rate, the New Territories still lags behind Hong Kong Island and Kowloon. Therefore, for investors, the latter two are still the top choices for property purchase.
Data source: Anjuke
Especially against the background of the current recovery of the financial industry supporting the warming - up of the Hong Kong property market, the demand for office leasing and property purchase in the financial industry has increased, and the income levels and employment conditions of financial practitioners have also improved simultaneously