Caitong: Policy relaxation and demand recovery driving the recovery of the Hong Kong real estate market, expected to usher in a new round of recovery cycle.

Caitong released a research report stating that the core driving factor of the ups and downs in the Hong Kong real estate market is the fluctuation of interest rates, and the downward trend of the US dollar benchmark interest rate anchored by the Hong Kong dollar interest rate is a certainty in the near future. In conjunction with loose real estate policies and marginal improvement in supply and demand patterns, the bank believes that the Hong Kong real estate market is poised for a new cycle of recovery. The first to benefit will be local developers in Hong Kong, and it is recommended to pay attention to: HENDERSON LAND (00012), KERRY PPT(00683), SWIREPROPERTIES(01972), SHK PPT(00016), HANG LUNG PPT(00101). Caitong's main points are as follows: The real estate market in Hong Kong, China has entered a new cycle of policy-driven and structurally differentiated. The February 2024 "cooling-off" policy became a key turning point in the market, driving a significant rebound in the Hong Kong property market. According to data from the Hong Kong Land Registry, there were small peaks in new and second-hand property transactions in April 2024, November 2024, and March 2025, with a total of 53,099 transactions in 2024, a year-on-year increase of 23.5%. Prices for new and second-hand properties bottomed out at the end of 2024 and the beginning of 2025, showing signs of stabilization. In terms of inventory, as of the end of 2024, the total stock of private residential properties was 1.292 million units, and with overall sales recovery, the overall turnover period has decreased, shifting the market from "high inventory pressure" to "supply-demand dynamic balance". The current recovery in the Hong Kong market is the resonance of three major factors: policy, interest rates, and demand. After February 2024, the policy environment shifted from containment to comprehensive stimulus, driving the first round of market recovery. The subsequent rate cuts by the Federal Reserve led to a decrease in Hong Kong HIBOR and prime lending rates. Especially in May 2025, the strengthening of the Hong Kong dollar triggered the Hong Kong Monetary Authority to intervene in the market four times, injecting a total of HK$129 billion liquidity, causing the 1-month HIBOR to drop from 3.98% to 0.57%. With most Hong Kong mortgages using "H-Binding" (HIBOR + 1.3%), mortgage rates lower than rental yields further warmed the market. Additionally, under the talent introduction plan, the Hong Kong population increased year-on-year in June 2025, contributing to incremental purchasing power and helping the market to consolidate a stable trend. Cycle judgment: Is it a phase of recovery or a turning point in the big cycle? Based on a comprehensive analysis of quantity, price, and policy signals, the current real estate market in Hong Kong is in the early stage of "bottoming out and gentle recovery", with the main characteristics including: 1) prices have stopped falling unilaterally, narrowing declines and structurally stabilizing; 2) transaction volumes rebound first, with improved sentiment indicators; 3) policy orientation shifting from "bubble prevention" to "market stability"; 4) Leading indicators are evident: interest rates continue to decline; increased supply, improved inventory turnover; population growth stimulating demand, etc. Risk warning: Interest rate cuts lower than expected; risk of policy tightening after market overheating; supply increases exceed expectations; population attraction policies lower than expected.