Morgan Stanley Flags Signs of Hong Kong Housing Turnaround

With Hong Kong home prices down 30 percent from their peak seven years ago, several drivers are pointing to a bottoming in the finance hub’s residential market, according to Morgan Stanley’s head of Hong Kong real estate research.

Indicators include declining mortgage rates, strong wage growth, limited land supply and a housing price index that has lagged the Hang Seng stock index and could catch up, the investment bank’s researchers said in their Asia Pacific Insight report. An influx of migrants from mainland China, owing to Hong Kong’s new talent programme, has also favourably tilted the supply-demand balance, said Praveen Choudhary, who leads the company’s real estate research team in the city and authored the report.

Choudhary added that investors could benefit from a long, steady cycle ahead, driven by a healthy mix of cycle-low valuations, strong balance sheets and high dividend yields.

“While we may be early, we see several reasons to be optimistic that we could be at the onset of an upcycle — which could last 4-5 years,” Choudhary said.

High on Henderson

Morgan Stanley upgraded Henderson Land Development to overweight (from equal weight), citing the Hong Kong builder’s progress on deleveraging, attractive valuation and potential gains from farmland resumption in the northern districts where it holds 42 million square feet (3.9 million square metres) of plots.

Henderson’s The Henley has sold 114 units this year after providing discounts of up to 17.5 percent, fetching contracted sales of HK$940 million ($119.8 million), the report said. In addition, the developer announced that trading firm Jane Street will lease more than 223,000 square feet (70 percent of lettable office space) in the first phase of a Central harbourfront office project.

The investment bank downgraded Sino Land to equal weight and recommended avoiding New World Development and Wharf Holdings (both underweight).

Hong Kong home prices are expected to outperform Singapore’s after the city-state saw a 50 percent surge in the past seven years, according to the report. Hong Kong’s market is seen as more attractive due to lower prices and the elimination of all stamp duties (unlike Singapore’s 64 percent foreign buyer stamp duty). Limited land supply will restrict new private home completions, and Hong Kong’s mortgage rates sit below 2 percent, compared with Singapore’s 2 to 2.3 percent.

Flat Forecast Unchanged

Hong Kong home prices are down 1.5 percent in the year to date but holding up better than expected, the report said.

The analysts noted that transaction volume for primary units in the first five months of 2025 was “lagging a bit” given a year-earlier high base spurred by the tax rollback.

Morgan Stanley revised its previous home price growth forecasts for the first and second halves of 2025 to minus 2 percent and 2 percent, respectively, from the previous minus 5 percent and 5 percent and kept its full-year forecast of flat growth unchanged.