Hong Kong Home Prices Could Rise Another 5% This Year: S&P

Hong Kong home prices are set to increase another 3 to 5 percent through the end of 2026, according to a study released this week, as conditions point to a limited recovery in the city’s housing market.

In a research report published on Wednesday, S&P Global Ratings says full-year increases in home prices in Asia’s most expensive housing market are likely to total 8 to 10 percent, but forecasts that price gains should cool to 0 to 3 percent in 2027 as pent-up demand fades and an ample pipeline of new housing limits pressure on buyers.

“Hong Kong’s traditional supply-demand imbalances likely won’t be as pronounced as they have often been in the past,” S&P Global Ratings credit analyst Edward Chan said. “Supply of new private homes over the next three to four years remains adequate, and subsidised housing supply is also on the rise.”

S&P’s report follows a more bullish forecast from Morgan Stanley earlier this week, which predicted 12 percent home price growth in Hong Kong for the full year of 2026 followed by an additional 5 percent increase in 2027. The US banking giant pointed to strong sales of new projects and limited supply of new housing sites, as well as capital and talent inflows from the Middle East and mainland China support the market.

Ample Supply

After dropping nearly 30 percent from 2021 to a bottom in mid-2025, Hong Kong’s home prices have rebounded by roughly 5 percent so far this year, according to S&P.

The housing recovery comes as the city’s gross domestic product (GDP) grew 5.9 percent in the first quarter, compared to a year earlier, according to advance data released by the Census and Statistics Department on Tuesday, marking the fastest pace in nearly five years.

S&P expects that pent-up demand from homebuyers will enable developers to sell 21,000 units this year, after home sales in the city jumped 21 percent in 2025 to 20,540 units, marking the highest total since 2019. The ratings agency expects that sales of new homes will likely ease to 18,000 units in 2027 as previously deferred demand is sated.

Given steady government sales of new housing sites in recent years and slow take-up by buyers before 2025, S&P sees an ample pipeline of new homes in Hong Kong, which it expects to limit price gains in the coming years. 

Over the next three to four years, around 101,000 new private homes will enter the market, alongside 59,000 subsidised sale flats via the city’s Home Ownership Scheme – nearly a 50 percent increase over supply levels in the first five years of the current administration.

Narrowing Yields

With rents rising more slowly than home values, S&P also expects that limited yields will limit future price increases. 

Gross rental yields for mass-market homes of less than 40 square metres (431 square feet) in Hong Kong fell to 3.5 percent in February, from a peak of 3.7 percent in the middle of last year. Those yields are only 0.25 percent higher than typical mortgage rates currently, compared with the 1.2 percent average spread seen in the market’s previous upcycle from 2008 to 2021 when Hong Kong home prices tripled.

Site Sales Heat Up

With home sales recovering after an extended drought, S&P warns of a risk of intense bidding in upcoming land auctions as developers rush to take advantage of the market upturn. Developers from mainland China may also join land auctions as Hong Kong stands as the strongest housing market in Greater China.

The city’s government could tender for sale up to nine residential sites during the financial year ending March 2027.

“Any purchases of land at inflated prices could be a long-term risk … In land auctions over 2021, many developers bet on price increases that didn’t materialise,” warned S&P. “The next few months should offer some clues regarding market appetite and discipline.”

Competition has already heated up over the past few months, with some developers paying  above market expectations to win land auctions. 

S&P noted that Kerry Properties in February paid HK$1.38 billion ($176 million) – 16.8 percent above the upper end of market estimates – to win a tender for a housing site in Shau Kei Wan on northeastern Hong Kong island. In November last year, Chinachem Group paid 26.5 percent above market estimates to win a site in Tsuen Wan, New Territories for HK$2.48 billion.