The purchasing power of Hong Kong's residential market continued to grow in the second quarter of 2025, while the office market gained momentum buoyed by active initial public offering listings, according to real estate analysts on Thursday.

Residential transaction volume in the city has exceeded 5,000 units for four consecutive months, with 5,955 sale and purchase agreements for residential building units in June, a 54.4 percent year-on-year increase, data from the special administrative region’s Land Registry shows. For the first half of 2025, transaction volume increased by 4.2 percent year-on-year to 28,947 units.

Cushman & Wakefield (C&W), a global real estate advisory firm, said the Hong Kong dollar’s interbank offered rate (HIBOR) plunge during the second quarter of 2025 has created favorable conditions for homebuyers due to lower mortgage and entry costs.

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Newly launched projects and a variety of pricing strategies by developers have spurred significant activity in the primary market, while improved rental yields have encouraged many investors to return, resulting in high overall transaction volumes, it added.

“While global uncertainties persist and the sustainability of low HIBOR remains uncertain, a potential interest rate cut by the United States (US) later this year could further support lower HIBOR levels, providing a positive narrative for the housing market,” said Rosanna Tang, executive director at C&W Hong Kong.

Eddie Kwok, executive director of valuation and advisory services at CBRE Hong Kong, said that the local housing market’s continued healthy performance indicated "a more resilient and fundamentally sound residential market".  

In terms of home prices, data from the Rating and Valuation Department showed that the overall residential price index rose by 0.5 percent between April and May, narrowing the first five-month decline to 0.9 percent. C&W predicts that the full-year home price changes will be within a 3 percent range.

Local property prices have fallen about 30 percent from their peak in 2021. In mid-June, Morgan Stanley forecast that Hong Kong’s housing prices are set to bottom out, owing to an influx of Chinese mainland buyers, strong capital markets, and a drop in interest rates.

Goldman Sachs also revised its Hong Kong property price forecasts for 2026 and 2027, raising the expected increases from 3 and 4 percent to 5 and 6 percent, respectively.

In the office leasing market, the Grade A sector experienced a surge in leasing activity in Q2, with the total area leased reaching 1.2 million square feet, marking the highest quarterly level since Q3 2019, according to C&W.

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Citing the city’s robust IPO activity, John Siu Leung-fai, managing director of C&W Hong Kong, said he believes the sector will remain strong in the upcoming months.

“With more mainland stocks expected in the pipeline, this should help support office market sentiment and stimulate downstream leasing demand, particularly in the banking and finance and professional services sectors,” he said.

Hong Kong is on track to reclaim its status as the world’s leading IPO fundraising venue this year. Forty-four IPOs were completed in Hong Kong during the first half of 2025, raising HK$107.1 billion ($13.6 billion) — seven times the amount raised in the same period last year — according to consulting and accounting firm PwC.

Contact the writer at gabylin@chinadailyhk.com