Hong Kong Property Market 2025 Year-End Report: Recovery Signs, Developer Debt Crisis

Coral King Ltd
Dec 25, 2025
5 min read

December 25th, 2025.

Hong Kong Property Market 2025: Turns a Corner

After a prolonged downturn that began in late 2019, Hong Kong's property market has reached an inflection point. Hong Kong's property market has turned the corner, with office leasing and housing markets leading the recovery in the fourth quarter of 2025. However, the path to stabilisation has been marked by significant financial challenges for major developers, while the residential sector shows promising momentum.

Hong Kong Home Prices Stabilise in 2025

The residential market has emerged as the brightest spot in Hong Kong's property landscape. Supported by a sustained low-interest-rate environment and wealth effects from a buoyant stock market, monthly residential transactions have exceeded 5,000 units for nine consecutive months, helping overall home prices to stabilise and show upward momentum.

According to the Rating and Valuation Department, the overall residential price index picked up by approximately 3.3% between March and October, bringing year-to-date home prices to a bottom-out point. This indicates that the residential market has now turned around and is entering the recovery phase.

Buyer sentiment has shifted notably. Many recent buyers in Hong Kong have been motivated not by expectations of quick gains, but by a belief that prices may not fall much further after years of declines. Mortgage costs have eased, developers have cut prices to clear inventory, and the market is increasingly seen as approaching a floor.

Industry analysts project continued growth ahead. Cushman & Wakefield anticipates full-year transaction numbers in 2026 to remain similar to the 2025 level, with home prices to pick up further by up to 5%.

Hong Kong Commercial Property: Office Market Recovery Gains Momentum

The commercial property segment presents a more complex picture, with prime locations outperforming decentralised areas. Central and Tsimshatsui are leading the office rebound, posting rental growth of 0.5% and 0.2%, respectively, in the second half of the year. Net absorption reached 1.63 million sq ft during the period, the highest level since the first half of 2019.

The recovery is underpinned by strong demand from hedge funds and private banking and wealth management centres, with bank deposits and the number of SFC licensed professionals hitting record highs in 2025.

However, decentralised areas like Hong Kong East and Kowloon East continue to experience significant rental corrections and high vacancy rates, highlighting a diverging market performance.

Capital values tell a sobering story. Capital values of overall Grade A offices fell 2.7% in the second half of 2025, while capital values of High Street shops fell a further 7.7% in the second half after dropping 10.2% in the first half, with capital values plunging 17.1% in 2025.

Hong Kong Property Developers: Sun Hung Kai Thrives While New World Struggles

Sun Hung Kai Properties has demonstrated resilience amid market headwinds. Sun Hung Kai Properties was honoured with four accolades at the Euromoney Real Estate Awards 2025, including the top distinction, World's Best Real Estate Developer Award.

In contrast, New World Development has become a cautionary tale. New World Development posted a second straight year of losses as debt pressures and a weak property market took a toll on the distressed Hong Kong builder. The developer, controlled by the billionaire Cheng family, lost HK$16.3 billion ($2.1 billion) from continuing operations in the year ended June 30.

The beleaguered developer secured a HK$88.2 billion ($11.2 billion) loan on June 30, in an eleventh-hour deal. Once among the most deep-pocketed property giants in the city, New World has faced mounting financial pressure, reporting its first loss in two decades in the 2024 financial year.

In a recent development, Goldman Sachs Group has sought to purchase a portion of New World Development's loans at a discount. The US investment bank approached some lenders involved in the record $11 billion loan extended to New World in June, willing to buy the debt at a discount of at least 15 cents on the dollar.

Hong Kong Banking Sector Faces Rising Property Loan Risks

The broader sector's debt pressures have triggered regulatory concern. Hong Kong bankers and regulators are signalling growing concern over the city's deepest real estate downturn since the Asian financial crisis. In recent months, the de facto central bank has intensified scrutiny of lenders' decisions on distressed loans and has called banks more frequently to gauge their willingness to extend credit lines to even smaller developers.

Hong Kong's property sector is under intensifying pressure as bond maturities are set to surge by nearly 70% next year amid falling sales and slumping valuations. Road King recently became the first city-based developer to default on bond coupons since China's property debt crisis began in 2021.

Hang Seng Bank reported a HK$2.5 billion charge on Hong Kong commercial real estate in the first half of 2025, up 224% from the previous year, reflecting rising bad loans in the sector.

Interest Rate Cuts Support Hong Kong Property Recovery

The Federal Reserve's monetary easing has provided critical relief for Hong Kong's property market. Supported by gradual interest rate cuts and attractive pricing across property sectors, end-user buyers and cash-rich investors continued to seek bottom-fishing opportunities, signaling signs of recovery in Hong Kong's real estate investment sentiment. As at December 8, the non-residential investment market for deals exceeding HK$100 million recorded 63 transactions in 2025, with total transaction volume rising 11% year-on-year to HK$34.0 billion.

Sales of new and lived-in homes are supported by the withdrawal of property curbs in February 2024, as well as other favorable measures introduced in the 2024 Policy Address to boost the real estate market.

Hong Kong Property Market Forecast 2026

Looking ahead, industry experts anticipate further stabilisation. After a six-year correction that began in the second half of 2019, Hong Kong's Grade A office leasing market is likely to reach a trough in 2026. Prices of mass residential are expected to rise about 5% in 2026.

However, uncertainties remain. Uncertainties over the new US administration's economic and interest-rate policies have led local investors to adopt a wait-and-see approach to commercial property investments. Trade-related tensions would certainly harm Hong Kong's property market.

The divergence between well-capitalised developers like Sun Hung Kai Properties and highly leveraged ones like New World Development underscores that not all players will emerge from this cycle equally positioned for the recovery ahead.

Coral King Ltd.

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