Knight Frank: Hong Kong luxury residential rent index surged 9.2% year-on-year as transaction activity in the housing market slows.

The latest "Monthly Property Market Report" released by Knight Frank indicates that the residential leasing market in Hong Kong remains active. The Knight Frank luxury rental index rose by 9.2% year-on-year in July, with an increase of 6.3% since the beginning of the year. Benefiting from educational demand and talent inflow, combined with the peak traditional leasing season, rental demand remains strong, providing robust support for luxury rental prices to stay high. After a strong performance in the residential market in the first half of the year, there was a slight slowdown in July. The number of primary residential transactions recorded in July was 796, down 60% month-on-month; the number of secondary residential transactions recorded was 3,666, down 35% month-on-month. With the mainland strengthening the enforcement of tax and capital control measures, the market atmosphere has become more cautious, and some buyers have slowed their market entry. High-quality office buildings in Central continue to be the market's most sought-after choice, with the vacancy rate falling significantly from 14.5% at the beginning of this year to 9.7% in July, resulting in a reduced number of available units for rent. Meanwhile, the demand for sea-view office spaces in Central and North Wan Chai remains strong. Inquiries for existing and soon-to-be-vacant sea-view units are enthusiastic, and the strong demand not only enhances landlords' bargaining power but also boosts the rental performance of waterfront offices, leading to a further decline in vacancy rates for related properties. The office leasing market in Kowloon showed signs of increased activity in July, primarily driven by the rising demand for large floor areas. Vacancy rates in Kowloon East and Tsim Sha Tsui continued to improve, dropping to 21.5% and 7.3%, respectively. Sixteen leasing transactions exceeding 10,000 square feet were recorded during the month, accounting for over 55% of the total absorption volume, while relocation cases increased from about one-third in the first half of 2026 to 40%. In Kowloon Central, particularly around the area, leveraging its superior waterfront location, mature business ecosystem, and core location advantages, it continues to be one of the most attractive office locations in the market. The completion of new Grade A office projects in West Kowloon is reshaping the market landscape, prompting landlords to retain tenants and enhance market competitiveness through more flexible leasing terms and incentive strategies. The core retail market in Central continues to show resilience. Recently, retail property on Gage Street was sold for HK$75 million, marking a 15.7% capital appreciation over three years; at the same time, Brentwood Coffee's expansion further reflects the confidence that coffee and lifestyle brands have in the Central retail market. Benefiting from stable office foot traffic and tourist spending in the area, it continues to solidify Central's position as one of the most attractive retail leasing markets in Hong Kong.