Hong Kong property rents are projected to rise 3 percent in the third quarter of 2025, potentially setting a new record, according to data released Thursday by Midland Realty, a leading Hong Kong property agency. This might also represent the first back-to-back quarterly rental increase in four years, Midland Reality said.

Hong Kong’s property market is staging a steady recovery in the second quarter of 2025, with both prices and rents rising simultaneously for the first time since early 2023, Midland Realty said. The rebound comes as the impact of the US tariffs gradually diminishes, coupled with strong demand from mainland students and professionals to live and study in Hong Kong.

The city’s residential market has witnessed improved sentiment, with primary transactions reaching 4,800 units in the second quarter — a six-year quarterly high — while secondary deals surged 13 percent over the previous quarter to 11,700 units, Midland Reality said.

READ MORE: HK rents climb for 4th month as talent influx fuels demand

Rents have soared to near-record levels, with the average per-square-foot rate hitting HK$38.1 ($4.85) in May, just 0.6 percent below the 2019 peak, Midland Reality said. Some newer developments in areas like Kai Tak have seen rents soar over 30 percent above pre-pandemic levels. Areas near universities like Tseung Kwan O and Sha Tin are seeing particularly strong rental demand, with Midland data showing these districts accounted for most mainland tenant transactions last year.

In terms of property prices, a continued upward trend of around 2 percent is expected in the third quarter, driven by sustained low interest rates, Midland Reality said. Despite ongoing global economic challenges, including tariffs, the Hong Kong market still remains resilient.

The US Federal Reserve on Wednesday left interest rates at their current levels, held steady in the 4.25-4.5 percent range. But the anticipated interest rate cuts from the Federal Reserve in the second half of 2025 could enhance liquidity in the market, making Hong Kong properties more attractive to global investors, Midland Reality said.

The dual increases in prices and rents suggests the market has bottomed out, Midland chief analyst Lau Ka-fai said. Lau told the media on Thursday that the rents could set new records in the third quarter with 3 percent growth, while prices may rise 2 percent, potentially marking the first consecutive quarterly increase in four years.

Benny Sham, an analyst for Midland Reality’s research center, said that third-quarter rents are expected to climb further, fueled both by Hong Kong’s talent acquisition programs for nonlocal students and the city’s sustained appeal to global investors.

READ MORE: Hong Kong house costs a record US$2 million a year to rent

Premium property transactions valued above HK$50 million per unit surged nearly 30 percent quarter-on-quarter in Q2, underscoring renewed confidence among high-net-worth investors, Sham said.

As to the overall performance in the first half this year, the residential price index edged down just 1.3 percent, representing the second-smallest half-year decline on record, he said.

Residential transactions in Hong Kong are projected to reach 17,000 units in Q3, a 3.1 percent of quarterly increase and over 50 percent of annual surge, Sham added. This will signal robust market recovery, he said.

Contact the writer at mikegu@chinadailyhk.com