Hong Kong’s Housing Market Shows Signs of Revival, but Banks Tighten Pressure on Developers

The Hong Kong residential real estate market is beginning to show initial signs of emerging from a prolonged crisis: transactions are increasing, interest rates are declining, and interest from mainland investors is rising. In the second half of 2025, housing demand may start to recover, reports Bloomberg, citing reports from Morgan Stanley and CBRE. However, an oversupply of unsold apartments, a rise in non-performing mortgages, and tightening requirements for developers still leave little room for definitive optimism.

Morgan Stanley believes that after seven years of decline, housing prices in Hong Kong have reached a bottom. “We may be drawing conclusions a bit prematurely, but there are reasons to believe that the market is on the brink of an upward cycle that could last four to five years,” the report says. A key factor supporting the market has been the activity of investors from mainland China. Rental yields in Hong Kong now exceed those in major Chinese cities, stimulating investment demand. Additionally, the recovery of equity markets is boosting financial capacity and buyer confidence, which helps sustain housing market activity.

Falling interest rates also play an important role in supporting the market. The one-month HIBOR interbank rate in Hong Kong is at its lowest level in three years after a significant drop last month, making mortgages more affordable for buyers. CBRE experts also highlight the crucial role of lower rates. This has stimulated buyer interest at a time when Hong Kong housing prices have hit their lowest level in nine years. A vivid sign of the recovery is the activity of Sun Hung Kai Properties Ltd., one of the city’s largest developers, which managed to sell 1,520 flats under its Sierra Sea project in just one month earlier this year.



According to CBRE, sales from January to June 2025 rose 4.2% compared to the same period in 2024, totaling 28,947 units. Most of the growth came from the secondary market, while sales of new flats accounted for about 9,000. Data from the Land Registry show that in June 2025, residential real estate transactions in Hong Kong increased by 16.7% compared to May, reaching 5,955 units. This marks the fourth consecutive month in which sales have exceeded 5,000 transactions—a level last seen at the end of 2021.

Eddie Kwok, Executive Director of Valuation & Advisory at CBRE, noted that the market is consistently absorbing 1,000 to 2,000 new flats per month. In his view, this creates conditions for reducing unsold housing inventory in the second half of the year. CBRE expects that in the next six months, sales will continue to grow, with total annual transactions projected to reach around 60,000 (+10%). Morgan Stanley forecasts that Hong Kong housing prices will stop declining and grow by approximately 2% in the second half of 2025.

At the same time, analysts warn of lingering problems: the city still faces a high level of unsold flats, a growing number of mortgages with payment arrears, and a rising unemployment rate. These factors could restrain the pace of recovery.

Moreover, banks are tightening their requirements for medium-sized developers in Hong Kong, who collectively hold debts of at least HK$173 billion ($22 billion). Lenders are demanding stricter refinancing conditions, requiring additional guarantees or collateral, and increasingly suspending new loans altogether, according to informed sources.

Particular attention from the banking sector has focused on Lai Sun Development Co., which is trying to refinance a loan maturing in October. Sources indicate the developer is facing heightened scrutiny from creditors. Another company, Wang On Properties Ltd., was forced to provide banks with additional collateral amid concerns over cash flow shortfalls.



These developments reflect growing caution in a sector long considered a cornerstone of Hong Kong’s economy. Medium-sized and smaller developers are under pressure due to a combination of high interest rates and asset devaluations following the city’s deepest real estate downturn in decades.

In an effort to preserve liquidity, developers are cutting expenses and rushing to sell off assets, which is starting to have effects beyond their own balance sheets. Heightened pressure could squeeze bank margins, negatively impact the job market, and trigger ripple effects in overseas markets where Hong Kong developers have traditionally been active. A sector once seen as a reliable growth engine is becoming a source of growing financial instability.

Lenders themselves are also taking extra measures to minimize rising risks. Recently, Moody’s highlighted the vulnerability of Hong Kong banks tied to commercial real estate lending: Dah Sing Bank Ltd.’s rating was downgraded, while Bank of East Asia Ltd. maintained a negative outlook due to asset quality issues in this segment.