Morgan Stanley said Hong Kong's property market is set for a broad recovery led by a strong rise in the residential segment that is spreading into office and retail markets. The firm raised its forecast for home price growth in Hong Kong to 12% this year, up from an earlier prediction of 10% [1]. It also expects home prices to climb another 5% in 2027 [1].
The bank increased its retail sales growth forecast for Hong Kong to 5% from 3% for 2026. Despite this, it reported that shop rents in the city declined 1.1% year on year in the first quarter of 2026 [1]. The retail rental market is still under pressure after a 10% drop in 2025, but Morgan Stanley projects rents will turn positive by the end of this year, although a full-year decline of around 3% is likely [1].
Praveen Choudhary, head of Hong Kong and India property research at Morgan Stanley, said, "We see office and retail following very strong home price increases in Hong Kong," indicating residential gains are supporting a broader property recovery [1].
Morgan Stanley published its report on Monday updating its forecasts for Hong Kong's property market recovery [1]. The firm’s projections signal optimism for the office and retail sectors as the residential market shows sustained momentum. The expectation that shop rents will stabilize and begin rising by year-end suggests a recovery trajectory after several years of declines.
The next key checkpoint will come with the year-end retail rental data, which will show whether shop rents have indeed turned positive as forecast.
