Zhi Tong Cai Jing·2026-01-06 09:16Core Viewpoint - Morgan Stanley has upgraded its industry outlook for Hong Kong's real estate to "attractive," expecting positive year-on-year growth in three segments: residential property prices, Central office rents, and retail sales for the first time since 2018 [1][2]. Residential Sector - The firm is most optimistic about the residential market, predicting that property prices, which have fallen by 30% since 2018, will bottom out by 2025 and rise by 10% in 2026, with further increases expected in 2027 [1]. - The removal of stamp duties for foreign and mainland buyers in February 2024 is anticipated to boost property purchases from mainland clients [1]. - The influx of mainland immigrants, which has doubled to 140,000 annually post-pandemic compared to 70,000 from 2012 to 2019, is contributing to positive population growth [1]. - A strong stock market performance, with the Hang Seng Index rising by 28% in 2025, has also improved market sentiment [1]. Office Sector - Despite high vacancy rates, the market is expected to recover, with Central office rents projected to increase by 3% this year due to rising demand for quality office properties from asset management firms, hedge funds, and wealth management institutions [2]. - Recent large transactions, pre-leasing activities, and increased trading volumes in the IPO market are seen as positive indicators for the office sector [2]. Retail Sector - Retail sales in Hong Kong are expected to grow by 3% year-on-year this year, driven primarily by an increase in visitor numbers [2]. - However, there are concerns regarding the ongoing rise in online retail sales and competition from lower-priced products and services in Shenzhen, which pose challenges to the retail market [2]. - The expansion of duty-free sales in mainland China is also viewed as a potential pressure point for Hong Kong's retail sector [2].