Caitong Securities: Policy easing and demand recovery drive the warming of the Hong Kong real estate market, expected to welcome a new round of recovery cycle

According to the Zhitong Finance APP, Caitong Securities released a research report stating that reviewing several rounds of fluctuations in the Hong Kong real estate market, the core driving factor is the volatility of interest rates. The decline of the US benchmark interest rate, which the Hong Kong dollar interest rate is pegged to, is a certain event in the near future. Coupled with relaxed real estate policies and marginal improvements in the supply-demand pattern, the bank predicts that the Hong Kong real estate market is expected to welcome a new round of recovery cycle, with local developers in Hong Kong being the first to benefit. It is recommended to pay attention to: Henderson Land (00012), KERRY PPT (00683), Swire Properties (01972), Sun Hung Kai Properties (00016), and Hang Lung Properties (00101). Caitong Securities' main viewpoints are as follows: The Hong Kong real estate market has entered a new cycle driven by policies and structural differentiation The "withdrawal of tightening" policy in February 2024 became a key turning point for the market, driving the Hong Kong property market to show significant signs of bottoming out and rebounding. According to data from the Hong Kong Land Registry, the transaction volume of new and second-hand homes saw small peaks in April 2024, November 2024, and March 2025. The total transactions of new and second-hand private residential properties in 2024 reached 53,099, a year-on-year increase of 23.5% compared to 2023. In terms of transaction prices, both new and second-hand property prices completed their bottoming out by the end of 2024 to the beginning of 2025, showing signs of stabilization. In terms of inventory, according to data from the Hong Kong Rating and Valuation Department, the total stock of private residential properties was 1.292 million units by the end of 2024. Due to the recovery of sales, the overall destocking cycle has decreased, and the market is shifting from "high inventory pressure" to "dynamic balance of supply and demand." The current recovery of the Hong Kong market is a resonance of three major factors: policy, interest rates, and demand After February 2024, the policy environment shifted from suppression to comprehensive stimulation, driving the first round of market recovery. Subsequently, due to the Federal Reserve's interest rate cuts, Hong Kong's HIBOR and prime rates were lowered. Especially in May 2025, the strengthening of the Hong Kong dollar triggered the Hong Kong Monetary Authority to intervene in the market four times, injecting a total of HKD 129 billion in liquidity. This action caused the 1-month HIBOR to drop from 3.98% to 0.57%. Since Hong Kong mortgages generally adopt "H mortgage" (HIBOR + 1.3%), the mortgage interest rate being lower than the rental return rate further warmed the market. In addition, under the influence of the talent introduction plan, Hong Kong's population saw a year-on-year recovery in June 2025, and the adjustment of demand structure continued to contribute incremental purchasing power, helping the market consolidate its stabilization. Cycle judgment: Phase recovery or major cycle turning point? Based on the signals from volume, price, and policies, the current Hong Kong real estate market is in the early stage of recovery characterized by "completion of bottoming out → moderate rebound." The main features include: 1) Prices have ended the unilateral decline, with narrowing declines and structural stabilization; 2) Transaction volumes rebounded first, with improved sentiment indicators; 3) Policy direction shifted from "preventing bubbles" to "stabilizing the market"; 4) Leading indicators are emerging: interest rates continue to decline; supply increases, and inventory destocking rates improve; population recovery stimulates demand, etc. Risk warning: Interest rates decline below expectations; risk of policy tightening after market overheating; supply increases beyond expectations; population attraction policies fall short of expectations