Core Viewpoint - The Hong Kong private residential market is expected to stabilize and enter a growth phase over the next two to three years, driven by limited land supply, improved affordability due to falling prices and interest rates, and increased demand from mainland buyers [2][4][5]. Group 1: Private Residential Market - The private residential market is projected to experience a "volume and price increase" cycle, with total transaction volume and prices stabilizing by 2024-2025 [2][4]. - The market has shown signs of recovery after a four-year decline, with total transaction volume increasing by 70% from the low point in 1Q24, and first-hand residential transaction volume rising by 98% [4][6]. - The price of private residential properties is expected to achieve double-digit annual growth, with a significant rebound anticipated starting from July 2025 [2][27]. Group 2: Supply and Demand Dynamics - Supply constraints have been actively managed, with the actual supply of first-hand residential properties falling short of government targets, leading to a decrease in inventory levels [6][8]. - Demand has been bolstered by multiple factors, including a significant reduction in property prices (up to 30.4%), improved employment rates, and a decline in mortgage rates, which have dropped by 92 basis points to 3.25% [6][8]. - Policies aimed at attracting talent and investment have led to an increase in the number of mainland buyers, with their share in the second-hand market rising significantly since 2022 [8][21]. Group 3: Office and Retail Property Markets - The office market is still adjusting, with a high level of existing supply that needs time to be absorbed, particularly in core areas like Central and Admiralty [34][41]. - The retail property market is showing signs of structural recovery, driven by local economic factors and an increase in visitor numbers, although challenges remain due to online competition and changing consumer behavior [50][64]. - The retail sector is expected to see moderate growth in high-end markets and key projects catering to tourists, while community and non-core retail properties may continue to face pressure [64][66]. Group 4: Developer Insights - Private residential developers are recommended for investment due to their significant valuation discount and high exposure to the private residential market [3][4]. - Holding-type developers are seen as offering reasonable valuations, focusing on absolute return opportunities through profit growth and dividend yields [3][4]. - A sensitivity analysis framework has been established to assess the net asset valuations of major Hong Kong property companies based on future price increases and inventory replenishment rates [3][4].

Core Viewpoint - Goldman Sachs has raised its forecast for property price growth this year from 5% to 12%, attributing this increase to government visa and immigration policies that are expected to boost demand [1][3]. Property Market Outlook - Strong rental growth is anticipated, with an estimated cumulative increase of about 20% from 2023 to 2025, alongside declining mortgage rates which may encourage more individuals to transition from renting to buying [1][3]. - The removal of certain restrictions at the beginning of the 2024 fiscal year is expected to significantly lower transaction costs, potentially stimulating investment demand [1][3]. - Future government policies are projected to continue supporting population growth, income increases, and housing affordability [1][3]. Rental Market Expectations - In the core Central district, office rental prices are expected to rise by 3% year-on-year, while other areas are anticipated to remain relatively stable [1][3]. - The retail market outlook is more cautious, with rental growth expected to be modest at 2%, due to ongoing competition from local residents traveling abroad and online shopping [1][3]. Stock Recommendations - Goldman Sachs upgraded the ratings of Henderson Land Development (00012) and Sino Land Company (00083) from "Sell" to "Buy," believing both companies are well-positioned to benefit from the rising cycle in the Hong Kong residential market, with target prices raised to HKD 39 and HKD 14.6 respectively [1][3]. - The firm reiterated its "Buy" rating for Sun Hung Kai Properties (00016), with a target price increased to HKD 159; these three companies collectively hold about 36% of the market's unit inventory and have various new projects underway [1][3]. - Conversely, the rating for Wharf Real Estate Investment Company (01997) was downgraded from "Buy" to "Sell," and Link REIT (00823) was downgraded from "Buy" to "Neutral" due to their significant exposure to the retail sector and specific company-level challenges; target prices were lowered to HKD 28 and HKD 41.3 respectively [2][4]. - Lastly, the rating for MTR Corporation (00066) was downgraded from "Neutral" to "Sell," with a target price raised to HKD 36.1 [2][4].

Group 1 - Goldman Sachs reports that the Hong Kong government's visa and immigration policies will boost property market demand, alongside strong rental growth and declining mortgage rates, leading to an increase in the forecast for Hong Kong property prices from 5% to 12% this year [1] - The firm expects a 3% increase in core Central district office rents this year, while rents in other areas are expected to remain stable [1] - The retail market outlook is cautious, with a projected moderate rental growth of 2% due to competition from local residents traveling abroad and online shopping [1] Group 2 - Goldman Sachs upgraded the ratings for Henderson Land Development (00012) and Sino Land Company (00083) to "Buy," believing these companies will benefit more from the rising cycle of the Hong Kong residential market, with target prices raised to HKD 39 and HKD 14.6 respectively [1] - The firm maintained a "Buy" rating for Sun Hung Kai Properties (00016), raising the target price to HKD 159, noting that the three companies hold about 36% of the market's unit inventory and have new projects underway [1] - Longfor Group (01113) was downgraded from "Buy" to "Neutral" due to limited local property projects and cost pressures in its UK pub business, although the target price was raised to HKD 53 [1]

Investment Rating - The report maintains a "Positive" investment rating for the Hong Kong real estate sector [1]. Core Insights - The Hong Kong residential market is stabilizing and showing signs of recovery, with new home sales volume approaching the peak levels of 2019, and second-hand home transactions reaching a new high since 2022. The inventory de-stocking cycle has significantly reduced from 125 months to 61 months [1][8]. - The retail property market is still under pressure, but rental declines are narrowing, and vacancy rates in core areas are decreasing. Office rents and occupancy rates are under pressure, with significant regional market differentiation [1][19][25]. - The residential market is expected to continue its upward trend in 2026, driven by lower mortgage rates and an increase in rental yields. Over 80% of residential properties are projected to achieve a balance between supply and rental demand [1][34][40]. Summary by Sections 1. Hong Kong Real Estate Market Review - Residential transaction volumes are increasing, with new home sales reaching 21,000 units in 2025, a 99.1% increase from the cycle's bottom [8][12]. - The inventory pressure has eased, with the de-stocking cycle for new homes dropping significantly [16]. - Retail property rents are still adjusting, but the rate of decline is slowing, and some core areas are showing signs of recovery [19][21]. - Office rents have decreased by 21.1% since their peak in June 2019, with rising vacancy rates [25][26]. 2. Outlook for the Hong Kong Real Estate Market - The residential market is expected to continue its recovery, with structural differentiation being a key feature [34]. - The ongoing Federal Reserve rate cuts are likely to support the Hong Kong real estate market's recovery [34][37]. - The proportion of properties achieving a balance between supply and rental demand is expected to increase, enhancing home buying demand [39][40]. - Talent attraction policies are anticipated to boost potential home buying demand as more skilled individuals move to Hong Kong [44][50]. 3. Valuation Elasticity of Hong Kong Property Companies - Current valuations of major Hong Kong property companies are at historically low levels, indicating potential for recovery [1][3]. - Companies with a higher proportion of development business and land reserves are expected to exhibit greater valuation elasticity [1][3]. - The top three property companies in terms of sales in 2025 are Sun Hung Kai Properties, Henderson Land Development, and Sino Land, with significant year-on-year sales growth for Henderson and Sino [1][3].

Core Viewpoint - UBS maintains a "Buy" rating for Link REIT (00823) with a target price of HKD 42, highlighting ongoing challenges in the Hong Kong retail property market and the company's strategic adjustments [1] Group 1: Hong Kong Market Conditions - Hong Kong retail property rents continue to face pressure, with negative growth expected for renewal rents in the second half of the fiscal year ending March 2026 [1] - New tenant rents show signs of stabilization, while the supermarket business has negatively impacted performance, although the dining sector is stabilizing [1] - The rise in e-commerce penetration continues to exert pressure on tenant performance, but less than 10% of Link REIT's Hong Kong properties overlap with online retail models, limiting the impact [1] Group 2: Mainland China Market Conditions - Retail assets in Beijing and Shanghai are undergoing rent adjustments due to historically high rental rates, but there has been a rebound in tenant sales and foot traffic since the end of last year [1] - The company plans to leverage Pop Mart stores to attract foot traffic and is looking for investment opportunities and plans to dispose of non-core assets in 2026 [1] - There is no new information regarding the timeline for inclusion in the Hong Kong Stock Connect, as indicated by the company [1]

Group 1: Residential Market - Hong Kong residential property prices increased by approximately 1.8% as of October last year, with an expected transaction volume of around 62,000 units for the entire year of 2025 [1] - The residential price increase for 2026 is anticipated to be within 5% [1] - The positive market sentiment in 2025 was driven by a sustained low-interest environment and a wealth effect from a strong stock market, leading to a recovery in property prices [1] Group 2: Office Market - The office market showed significant recovery by the end of last year, with a net absorption of approximately 984,000 square feet in the fourth quarter, leading to an expected total absorption of about 1.6 million square feet for 2025, the highest in seven years [1] - The banking and financial sectors continued to be the main drivers of new leasing demand, with Central district rents increasing by approximately 1.9% quarter-on-quarter [1] - Overall office rents are projected to fluctuate between a decrease of about 1% and an increase of about 1% in 2026 [1] Group 3: Retail Market - The retail market improved in the fourth quarter of last year due to a rebound in visitor numbers, with a decrease in overall retail property vacancy rates to approximately 5.9% [2] - New leasing transactions in Central were primarily driven by banks, financial institutions, and high-end skincare brands [2] - Retail rents are expected to rise by about 2% to 3% in the first half of 2026 [2] Group 4: Logistics Market - The logistics property market remains under pressure, with a rise in the vacancy rate of premium warehouses to approximately 11.2% in the fourth quarter of 2025, a new high since the pandemic [2] - Despite an overall increase in trade performance, leasing demand in the logistics sector remains weak, with rents declining by approximately 3.4% quarter-on-quarter [2] - Overall logistics property rents are expected to decrease by about 7% in 2026 [2] Group 5: Capital Markets - The investment atmosphere improved significantly in the fourth quarter due to falling interest rates and attractive asset prices, with total transaction value for properties over HKD 100 million rising to approximately HKD 19.1 billion, a quarter-on-quarter increase of about 115% [2] - Office properties accounted for about 87% of the total transaction volume for the quarter [2] - The total property investment transaction value for 2026 is expected to be around HKD 40 billion [2]

Core Viewpoint - Hong Kong's residential transaction volume and prices are expected to rebound significantly starting from March 2025, with total transactions projected to exceed 60,000 for the year, marking the second highest level in nearly 13 years, following 2021 [1][2][7] Residential Market - In the first 11 months of 2025, Hong Kong's total transactions for new and second-hand private residential properties reached 54,669, representing a year-on-year increase of 17.0% [2] - The second-hand residential prices confirmed a bottoming out from March to May 2025, with prices rising by 6.2% since the low point in late May, and an expected annual growth of 4.5% for 2025 [2][7] - The share of high-value properties (over 5 million HKD) in transactions has rebounded for the first time since 2022, indicating an increase in investment demand [2][7] Factors Driving Demand - The primary driver for the rebound in residential volume and prices is the increased asset allocation demand in the context of the Federal Reserve's interest rate cuts [7] - Contributing factors include the stabilization of the HKD/USD to RMB exchange rate, capital repatriation amid declining USD credit, and a strong wealth effect from rising Hong Kong stock prices [7] - Additional supportive elements include favorable talent attraction policies, an increase in international students, a rising housing demand, and a controlled supply from the government [7] Commercial and Office Market - The commercial office market in Hong Kong is under overall pressure but shows structural improvements, with increased transaction activity driven by domestic enterprises expanding their operations [14] - The rental rates for office spaces are still declining, with vacancy rates around 17%, but there is a trend of converting office spaces into student accommodations to address high vacancy rates [14] - Retail properties in core areas are experiencing improved rental conditions despite overall pressure, supported by an increase in inbound tourists and retail sales growth [14]

Group 1: Residential Market Insights - The Hong Kong residential market saw a 17% month-on-month increase in total transaction volume in June, driven by a 28% surge in primary residential sales [1] - Despite the increase in transaction volume, residential prices are under pressure, with a 0.9% decline year-to-date and a 6.2% year-on-year decrease as of May [1] - The most sought-after residential properties are priced between 12 to 15 million HKD, with the most active areas being Wong Chuk Hang and Ma On Shan [1] - The luxury residential market recorded 54 transactions exceeding 78 million HKD in the second quarter, a 29% increase from the previous quarter [1] - The rental market for luxury properties is performing well, with a 0.7% month-on-month increase in May and a 1.4% increase year-to-date, driven by demand from non-local professionals and students [1] - The forecast for general residential prices is a potential decline of up to 3% this year, while luxury and general residential rents are expected to rise by 3% to 5% [1] Group 2: Office Market Dynamics - The Grade A office market is showing signs of recovery, with hedge funds being the primary tenants and significant leasing activity, such as Jane Street leasing 223,000 square feet in Central [2] - The demand for well-located, high-quality office spaces in Central remains strong, particularly for units sized between 3,000 to 5,000 square feet [2] - The IPO market in Hong Kong is performing well, attracting mainland enterprises, which is expected to boost office leasing demand in the second half of the year [2] - The Kowloon office market faces challenges due to global trade uncertainties, with subdued leasing activity noted in Kowloon East [2] - Rental prices in Tsim Sha Tsui have seen a slight increase of 0.7%, with demand primarily from the insurance, finance, and professional services sectors [2] Group 3: Retail Market Trends - The retail sector is experiencing a slowdown in expansion plans as local consumer spending decreases despite rising incomes [3] - The interest of mainland tourists in luxury goods has diminished, impacting retail strategies [3] - The consumption patterns of local citizens are evolving, with Generation Z becoming a key driver in luxury spending, emphasizing brand value, sustainability, and pricing transparency [3] - Although the tourism industry in Hong Kong is recovering, retail consumption across various sectors has not fully rebounded [3]