_Hong Kong property market 2026 forecasts
At a press conference held in Knight Frank Hong Kong office this afternoon, Wendy Lau, Executive Director, Head of Hong Kong Office Strategy & Solutions, Steve Ng, Executive Director, Head of Kowloon Office Strategy & Solutions, Russell Lam, Executive Director, Capital Markets, Cyrus Fong, Executive Director, Head of Valuation & Advisory, Greater China, Helen Mak, Senior Director and Head of Retail Services and William Lau, Senior Director, Head of Residential Agency presented their forecasts for Hong Kong’s property market for 2H 2026.
Hong Kong Property Market 2026 2H Forecast:
Hong Kong Residential Market:
Cyrus Fong, Executive Director, Head of Valuation & Advisory, Greater China
Hong Kong’s residential market is showing signs of recovery. As of April 2026, residential home prices have increased for approximately 11 consecutive months. Monthly transaction volumes are currently around 6,600 deals. Supported by the return of the Chinese mainland buyers, improved market sentiment, and the gradual absorption of supply, both the primary and secondary markets are witnessing simultaneous growth in both prices and volumes. Well-located residential projects with competitive pricing are expected to remain highly sought after, sustaining strong sales momentum.
We forecast total residential transaction volume to reach 75,000 to 80,000 units in 2026, up 20% year over year. Primary transactions are expected to account for 35%, with secondary transactions making up the remaining 65%. Overall, against a backdrop of declining inventory, stronger buying interest is emerging. Together with Hong Kong’s attractive tax regime and free flow of capital, these factors are expected to continue driving capital inflows and provide stable support to the residential market.
Mortgage rates remain low, alongside abundant market liquidity, which is expected to support a gradual increase in home prices. Mass residential prices are forecast to increase by 8% to 10% in 2026. Rental demand is also strengthening, driven by talent inflows and non-local students. Residential rents are expected to rise by 5% to 8%, potentially reaching new record highs.
For 2026, land sale revenue is projected to reach HK$18 billion and HK$22 billion, representing a year-on-year increase of 130%.
William Lau, Senior Director, Head of Residential Agency
Hong Kong’s luxury residential market is becoming increasingly discerning in 2026, with demand continuing to concentrate on high-quality first-hand developments in prime locations. Developers are showing greater confidence in pricing and sales strategies, particularly for higher-end projects on Hong Kong Island and in Kowloon. There is a growing trend for shorter transaction periods and less flexible payment terms, reflecting resilient demand for scarce, well-located luxury assets.
At the top end of the market, momentum remains positive. Super-prime residential sales continue to strengthen, with both transaction volumes and total consideration rising, reflecting sustained appetite from high-net-worth purchasers. With luxury prices remain 6.7% below the previous peak recorded in Q4 2021, indicating further room for recovery as sentiment continues to improve.
We expect luxury residential prices to increase by 5% to 8% in 2026. The leasing market is also following a similar pattern of outperformance, with the Peak and Island South continuing to outperform traditional luxury districts in rental growth. Looking ahead, luxury rents are forecast to rise by 3% to 5% in 2026, supported by sustained demand for prime homes in Hong Kong’s most prestigious neighbourhoods.
Hong Kong Island Office Market:
Wendy Lau, Executive Director and Head of Hong Kong Office Strategy & Solutions
The Hong Kong Island Grade-A office leasing market continues to display pronounced bifurcation in the first half of 2026. Premium CBD locations demonstrate robust resilience, with Central overall recording a 9.9% year-to-date rental increase. In contrast, elevated vacancy rates persist in several districts, partially driven by the influx of substantial new office supply.
Leasing demand remains heavily supported by the banking and finance sector, with notable expansion from securities, private wealth, and asset management firms. Leasing momentum is also accelerated by the co-working sector, which accounted for 18% of the first quarter’s take-up, executing multiple large-scale transactions predominantly within Central. PRC enterprises and start-ups are vital pillars of co-working demand. Corporate occupiers are actively capitalising on current market dynamics to upgrade their premises, showing a strong preference for unique, expansive floorplates and increasingly exploring opportunities to acquire office assets for self-use.
As we move into the second half of the year, rental trajectories will be heavily influenced by building quality and location. Supported by ongoing flight-to-quality trends and high-specification preferences, we project that overall Hong Kong Island Grade-A office rents will grow by 1% to 5% in 2026. Specifically, the highly sought-after Central submarkets are forecast to outperform, surging by 8% to 12%, while decentralised areas - notably Causeway Bay are facing fierce competition and excess supply.
Kowloon Office Market:
Steve Ng, Executive Director and Head of Kowloon Office Strategy & Solutions
Office rents across Kowloon have continued to decline, though at a moderating pace, signalling a more stable outlook ahead. Vacancy rates are still edging up, but only modestly, suggesting the market is approaching its peak. While Kowloon Central and West are showing early signs of stabilisation, Kowloon East remains under pressure, with a comparatively higher vacancy rate.
On the demand side, sentiment is improving, with a return of three tenant groups — banking and finance, insurance, and PRC firms, particularly for larger office spaces. This recovery in demand, coupled with a supply gap expected over the next three years from 2027, is supporting a “soft landing” for the market. While new supply within Kowloon remains limited, future developments are emerging in outer areas such as Tung Chung and the Northern Metropolis.
The combination of returning demand and constrained supply is underpinning a gradual recovery, with tenant preference continuing to focus on West Kowloon and Kowloon Central. Recent quarterly trends also point to stabilisation, following a rental decline in Q1 and a more balanced performance in Q2 this year.
Looking ahead, Kowloon East is likely to remain under pressure in the second half of the year, with rents expected to decline by 4% to 6%. However, rental levels across the wider Kowloon market are nearing a floor, with a more modest decline of 1% to 3% anticipated. Early signs of stabilisation are emerging.
Hong Kong Capital Markets:
Russell Lam, Executive Director, Capital Markets
From January to May 2026, properties valued at HK$100 million or above recorded total transactions of HK$29.54 billion across 59 deals—representing a 111% year-on-year increase in both transaction value and deal volume. This rebound uplift was driven by a growing supply of discounted and distressed assets, alongside financially driven sales.
The office sector led the market, accounting for 62.5% of total transactions, supported by end-user demand amid stabilising prices, which drive renewed investor confidence in prime assets. The living sector, including residential, residential sites and hotel and serviced apartments, accounted for 32%. Retail transactions lagged at 4.9%, reflecting weak consumer sentiment and structural shifts in spending habits.
Looking ahead to 2026, Hong Kong’s capital markets are expected to gain further momentum across major sectors. Residential is gaining traction and is set to lead the broader recovery. Retail remains subdued, with investors targeting smaller neighbourhood assets with stable tenants, while end-users focus on vacant units priced close to replacement cost. Logistics investment activity has been relatively slow year-to-date, amid elevated vacancy levels and new supply coming to market.
Meanwhile, the office market recovery is broadening—from large-scale end-user acquisitions to renewed interest in strata-titled units within prime buildings.
Hong Kong Retail Market:
Helen Mak, Senior Director, Head of Retail Services
Hong Kong’s retail market is undergoing structural change, driven by the steady growth of online shopping and changing spending patterns across borders.
Online retail sales increased from HK$20.6 billion in 2020 to a new high of HK$35.8 billion in 2025. Notably, even though overall retail sales fell in 2024 compared with 2023, the share of online sales still rose from 8.0% to 8.4%, indicating a continued shift towards online shopping. Online retail spending by Hong Kong residents is expected to reach another record high in 2026, confirming that this is a lasting trend. At the same time, more Chinese mainland e-commerce platforms are entering Hong Kong, intensifying competition and disruption for traditional retailers.
As we highlighted earlier this year, rental performance between prime and non-core retail locations has continued to move in opposite directions, with rents rising in core areas while declining in non-core locations. Recent results from major landlords support this trend.
Prime shopping malls such as Harbour City have recovered well after a brief dip in 2022, with average rents rising from HK$334 in 2021 to HK$361 in 2025, supported by strong demand in core shopping areas. In contrast, mid-market shopping malls such as Plaza Hollywood have seen weaker performance, with average rents falling from HK$81 to HK$69 amid softer local spending. Meanwhile, Link REIT’s community shopping centres have remained generally stable, although rents edged down slightly in 2026, declining from HK$63.3 in March 2025 to HK$60.1 in March 2026. This highlights the significant impact of online shopping on necessity-based retail.
Overall, the market is becoming increasingly polarised, with prime retail benefiting from recovery and tourism, while mid-tier and neighbourhood centres face ongoing pressure.
Although there are uncertainties around fuel costs and tighter financial policies affecting mainland investment in Hong Kong, we remain our forecast that prime street shop rents will increase by 5% to 10%, prime shopping mall rents will grow by 0% to 5%, and non-core shopping mall rents will remain flat or decline by up to 5% in 2026.