The ups and downs of Hong Kong's property market

On October 7, 2026, in the fourth quarter of the year, the Hong Kong residential property market stands at a subtle turning point. The market purchasing power accumulated over the past year has been gradually released, and the tug-of-war between the tightening of cross-border capital policies for the Chinese mainland and the interest rate hikes by the Federal Reserve has begun to emerge. The upward trend of property prices has slowed down significantly, and the market has entered a transition phase of "consolidation period" and "trading price for volume".

Looking back at the third quarter, the Hong Kong residential market has already shown a consolidation trend. Data from Centaline Property shows that a total of 13,242 residential property sale and purchase transactions were recorded in the third quarter, plummeting 40.2% quarter-on-quarter. The latest figures from the Rating and Valuation Department also show that the private residential price index has risen by about 7% cumulatively in the first 8 months of this year, but property prices have started to see a correction of around 0.8% from July to August.

Affected by the policy shift of the Federal Reserve, stock market volatility and the mainland's tightening of cross-border capital policies, Cushman & Wakefield has revised its market forecast to a more prudent stance. Tang Shuk Yin, Deputy Managing Director and Head of Hong Kong Research at the firm, said that considering the slowdown in transaction volume in the third quarter, the full-year residential transaction forecast has been adjusted downward from the previous estimate of about 75,000 transactions in the last quarter to a level of about 67,000 to 68,000 transactions. In terms of property prices, if interest rates rise again in the fourth quarter, the property market will be dominated by consolidation in the short term, so the full-year residential property price increase is expected to be around 7%.

Mainland buyers: accounting for half of the Hong Kong property market

The driving role of mainland buyers in this round of recovery of the Hong Kong residential property market is obvious. After Hong Kong abolished the stamp duty levied on non-resident property buyers in 2024, mainland buyers flooded into the Hong Kong real estate market, with their scale expanding rapidly, and their property purchase volume accounting for about one-third of the total property transaction volume in Hong Kong.

According to data from Savills, in property transactions of at least HK$100 million in the first quarter of this year, mainland buyers accounted for more than half, a further increase compared with the proportion of about 40% in 2025. The In-depth Analysis Report on Mainland Buyers released by Midland Realty Research Centre in March 2026 shows that two years after the full withdrawal of all property cooling measures in Hong Kong (from March 2024 to February 2026), the entry of mainland buyers into the market surged sharply. During the period, the registration volume of primary and secondary residential properties reached 27,702 units, a 1.63-fold surge compared with the period before the withdrawal of cooling measures; the total involved capital was about HK$288.4 billion, of which as high as 60.3% flowed into the primary market.

However, the external conditions supporting this round of price rise are loosening. The mainland has started to tighten cross-border capital policies since the middle of the year. Lai Kim Ming, Senior Director of Valuation and Advisory Services at Cushman & Wakefield Hong Kong, said when releasing the 2026 Q3 Hong Kong Property Market Review and Outlook that the number of inquiries recorded by the firm in September fell by about 35% compared with the year's high in May. At the same time, the Federal Reserve raised interest rates by 0.25 percentage points in September, and further hikes are possible before the end of the year, putting Hong Kong banks under pressure to raise their mortgage rates accordingly. The simultaneous narrowing of cross-border capital channels and rising financing costs have produced a dual inhibitory effect.

Facing the slowdown in transaction volume in the third quarter, developers immediately adjusted their strategies at the end of the quarter, launching new projects at prices close to the market level or even lower than the market price. Among them, the discounted average per-square-foot price of the first batch of units at the Vision Tide project in Yau Tong fell below HK$14,000, lower than the "deep-water bomb price" of HK$14,997 per square foot at the La Vetta project in Yau Tong in 2023, hitting a new low for new properties in Kowloon urban area in nearly a decade. Entering the fourth quarter, it is believed that the property market will continue to be dominated by the primary market, and "trading price for volume" will become the main strategy of developers.

From "increment narrative" to "stock game"

Despite the short-term consolidation, leading bank Citi maintains a positive view on the medium-term prospects of the Hong Kong property market, forecasting that local property prices will rise by 6% in 2027, and rents will hit a new high with a 6% increase as well.

Citi pointed out that the population forecast in the government's new Long Term Housing Strategy is conservative, underestimating the speed of household formation in the future. The latest private housing supply target set by the Long Term Housing Strategy for 2027-2036 is 126,000 units, a 5% annual decline, which means 12,600 units per year, 34% lower than the 190,000-unit target of 10 years ago (2016-2025). Demand is generally stable, remaining flat year-on-year, 8% lower than 10 years ago, with a public-private ratio of 70/30. As new supply is more concentrated in the Northern Metropolis, Citi believes that the supply outlook in core areas will be tighter.

The bank pointed out that the inflow of students brings additional upside space for demand. Hong Kong added 51,000 student visas from 2015 to 2025; and the target of 100,000 non-local students by 2030 under the five-year plan only means an annual increase of 4,000 people. The estimated demand is 23,000 units (assuming 2 students live in each unit), which has already increased by 45% year-on-year, that is, an increase of 7,200 units, offsetting the slowdown in household formation. As Hong Kong accelerates its development as an education hub, further upside space for demand is expected.

Citi believes that the official demand forecast may underestimate the number of households formed in the future. According to the Long Term Housing Strategy forecast, the population will increase by 418,000 to 8.06 million from 2027 to 2036, which will only bring 186,800 new households; in contrast, from 2015 to 2025, when the population only grew by 200,000, 304,000 new households were already created. The bank also expects the inflow of talents and students to bring upside space for demand; Hong Kong's deferred gain tax reform has the potential to become a short-term catalyst to attract financial professionals.

The bank pointed out that the number of completed private residential units is expected to fall to 15,400 units in 2027, compared with 18,400 units in 2025 and 17,000 units in 2026. Based on the land supply from 2023 to 2025, the completion volume in 2028 is expected to remain at a similar low level. In the first 8 months of 2026, primary market transaction volume rose 10% year-on-year to 14,300 units; the bank estimates that 2026 sales will rise 3% year-on-year to 21,100 units.

Supported by the rental demand from professionals, students and new arrivals, the government's rental index has risen by about 4.9% cumulatively in the first 8 months. The rental market is relatively resilient, and Cushman & Wakefield expects full-year residential rents to rise by 5% to 7%. The rise in rents outpaces the rise in property prices, which means that the logic of "mortgage payment is lower than rent" is re-establishing in some areas, which may be the solid bottom support of the property market.

The essence of this fluctuation in the property market is that the Hong Kong residential market is bidding farewell to the "increment narrative" dominated by southbound capital, and returning to a "stock game" jointly supported by local rigid demand and inflow of professionals. The former comes rapidly and goes quickly; the latter, although slow, is more lasting. For market participants, understanding the rhythm of the ebb and flow of these two forces may be more important than focusing on short-term property price fluctuations.

This article is from the WeChat official account "Viewpoint", author: Viewpoint New Media, published with authorization from 36Kr.