Global real estate advisory firm Cushman & Wakefield is expecting Hong Kong’s overall home prices to rise by close to 2 percent this year, with residential transactions of 58,000 to 60,000 units, buoyed by buyer confidence amid a gradually easing financial environment (US interest rate reductions) and a positive wealth effect attributed to a resilient stock market and sustained capital inflows.

According to Land Registry data, total residential sales and purchase transactions in the third quarter gained 63 percent annually to reach 16,700 units, while home prices dipped 0.2 percent between January and August this year, the Rating and Valuation Department (RVD) said. As of August, Hong Kong’s home prices had plummeted 27.5 percent from their record-high level in September 2021.

The global real estate advisory firm said the number of residential sales and purchase transactions have hovered above 5,000 for seven successive months since March this year, and this has supported the city’s overall residential property prices.

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“Looking ahead, if the United States implements further rate cuts within this year, the Hong Kong dollar interbank rate is expected to fall further, reducing capital costs and making rental yields more attractive,” Cushman & Wakefield Hong Kong Executive Director and Head of Research Rosanna Tang said.

“This could encourage more investors and renters to enter the market, providing positive support to both transaction numbers and property prices,” she added.

The leasing market in the city’s residential property sector has already seen signs of recovery as the resilient rental performance continues to attract investors into the market. The rental index of residential homes climbed 3.2 percent in the first eight months of this year, causing the index to rebound by 14.5 percent from the low level recorded in January 2023, RVD data revealed.

Edgar Lai, valuation and consultancy services senior director at Cushman & Wakefield Hong Kong, said ongoing cash rebate offers from banks and the market’s expectations of further rate cuts will fuel residential market sentiment, particularly in the small- to mid-sized segment.

In the office segment, Cushman & Wakefield expects the net absorption of office spaces in the third quarter to have reached 401,000 square feet, the highest level since the second quarter of 2019, underpinned by the improved market sentiment brought about by the recovery in initial public offerings and the stock market.

“Amid the heavy new office supply pipeline, while occupiers are still cost-cautious, we forecast overall office rent will drop 4 to 6 percent this year,” Cushman & Wakefield Hong Kong Managing Director John Siu noted.

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The managing director also expects overall high street retail rents in Hong Kong to drop 1 to 2 percent this year, with the overall vacancy rate slightly trending downward.