UBS Report: Hong Kong Property Market at Turning Point, Expected to Recover Within 3-5 Years

UBS released a research report pointing out that the residential property market in Hong Kong is at a turning point. The report quoted the views of the founder of Centaline Property, Shih Wing Ching, stating that the residential property market in Hong Kong will enter an upward cycle in the next 3 to 5 years. The report indicated that the recovery of the residential market is mainly supported by the following factors: strong rebound in sales of new and second-hand residential properties, and private housing supply has peaked. The report mentioned that with the continuous influx of talent and students from mainland China, the vacancy rate of residential properties in Hong Kong remains at a low level of about 4%, with steady rental growth reflecting strong residential demand. On the supply side, due to the long development cycle and weak land sales in recent years, the supply will continue to be limited. In terms of the macroeconomic environment, the unemployment rate in Hong Kong has dropped from 8% after the epidemic to the recent 3.8%, and household income has also seen moderate growth. The report mentioned that with the recent interest rate cuts, more tenants may switch to property ownership. Although the expected increase in property prices is not as strong as the previous cycle (2003-2018), it is believed that prices may return to the high levels of 2021 within 3 to 5 years. Regarding the increase in public housing supply, the report believes that this will reduce the government's need for intervention in the private market, helping to maintain social stability. As the target groups for public housing and private residential buyers do not overlap significantly, the expected increase in supply will not affect the demand for private residential properties. In terms of integration in the Greater Bay Area, the report points out that the Hong Kong property market has differentiated advantages under the "One Country, Two Systems" framework, including property rights protection, free flow of funds, pegging to the US dollar, and low taxes. Therefore, it is expected that the demand from mainland investors for Hong Kong properties will remain strong, especially properties near universities with high investment potential. In retail, the report mentioned that the industry faces structural challenges due to e-commerce, and although the restaurant industry remains resilient, overall leasing demand is weak. In contrast, the office market has shown signs of recovery with recent improvements in the capital market. It is expected that commercial properties will gradually improve, but uncertainties in the macroeconomic environment and global monetary policies need to be monitored.