Savills: Hong Kong luxury home prices expected to rise by at most 5% in 2026.

Savills Wei Shu released a report stating that macroeconomic recovery, declining interest rates, and policy support have helped boost investment sentiment and market stability. In 2025, there were 241 luxury residential transactions in Hong Kong with a transaction value exceeding one billion Hong Kong dollars, the highest in nearly four years, and positive market sentiment continued into the first quarter of 2026. It is expected that luxury residential prices in Hong Kong will increase by 0% to 5% in 2026. In terms of Grade A office buildings, the net absorption in the first quarter reached 375,000 square feet, remaining positive for the fourth consecutive quarter. The cumulative net absorption over the past four quarters reached 2.7 million square feet. The overall vacancy rate decreased by 0.4 percentage points to 16.8% compared to the previous quarter, marking the largest decline since the second quarter of 2015. The overall rental in the first quarter increased by 1.6%, marking the strongest increase since the third quarter of 2018. Sherri Wei Shu, Chief Operating Officer of Savills Hong Kong Advisory Services, stated that looking ahead to the next two quarters, with continued expansion in local wealth management and insurance industries, leasing transaction volumes are expected to further increase from the first quarter. The overall rental for Grade A office buildings for the whole year is expected to decrease by 1% to increase by 3%, with a forecasted increase of 1% to 3% for Grade A office buildings in the Central Business District. Regarding retail properties, Savills Wei Shu stated that the market fundamentals continued to improve in the first quarter of 2026, with a year-on-year increase in visitor arrivals of 18.4% in January and February, accelerating from 12.7% in the fourth quarter of 2025. The vacancy rate for prime retail units in core retail areas increased slightly by 1 percentage point to 6.8% compared to the previous quarter, marking the second-lowest level since the first quarter of 2024. The low vacancy rate drove rental increases by 0.9% and recorded growth for the fifteenth consecutive quarter. Savills Wei Shu forecasts a 5%-7% increase in rental prices for core street shops in 2026, and a 0%-5% increase for major shopping malls. In terms of industrial and logistics properties, Savills Wei Shu's Executive Director and Head of Hong Kong Industrial and Logistics Department, Lee Shang-wen, stated that landlords are willing to adjust rental expectations, which is helping stimulate market demand. Net absorption in warehouses returned to positive territory for the first time since the fourth quarter of 2024. The uncertainty in the global trade market and rising oil prices have led logistics operators to take a cautious approach to operational costs, so the leasing atmosphere in the coming months is expected to remain cautious. However, in order to support long-term business development and improve operational efficiency, demand for upgraded facilities will continue to drive demand for high-spec warehouses. This type of demand is less likely to be affected by short-term market fluctuations, with demand from e-commerce operators being particularly significant. In terms of capital markets, Savills Wei Shu's Executive Director and Head of Hong Kong Capital Markets Department, Yan Chun-ming, stated that there are signs of professional investors gradually returning to the market. If this trend continues, investment transaction volumes are expected to further increase in the future. In addition to the demand from local buyers and long-term investors for significantly discounted assets, professional investors including real estate funds are also focused on growth opportunities in the education sector. There is increasing interest in projects that can be converted into student dormitories from hotels and residential properties, as well as other commercial facilities that can legally be used for educational purposes, with this trend expected to continue throughout the year.