The Hong Kong property market stands at the crossroads, as highlighted in the analytical report released by the Aegis Group for the fourth quarter of 2024. The report underscores a trend of decline that has overshadowed the city's real estate sector. Following the Hong Kong government's decision in February to rescind stamp duty on residential property transactions, there was an initial surge in residential sales. However, influenced by various internal and external factors, the momentum has dwindled, resulting in fluctuating transaction volumes and property prices. Notably, the commercial property sector has underperformed in comparison. Looking ahead, the Aegis Group projects that the residential market in 2025 will primarily focus on digesting the inventory of new developments, while the luxury property segment may see steady growth.

As of November 2024, data from the Hong Kong Land Registry indicates that a total of 48,996 residential transactions were recorded throughout the year. Of these, 16,025 involved new properties, a figure that has exceeded the annual totals of approximately 10,000 transactions recorded in both 2022 and 2023. The secondary market reflected similar patterns with 32,971 transactions, mirroring the activity of the past two years.

Despite these transaction numbers, the awaited uplift in Hong Kong's property market has not materialized, with residential property prices continuing their bearish trend. As of October 2024, overall residential prices have seen a decrease of approximately 6.8% from the end of 2023 and a staggering 27.1% when compared to the peak in July 2021. In the rental space, while potential renters adopt a wait-and-see approach, the talent acquisition initiatives have propelled rental demand, resulting in a 4.8% increase in residential rents in the first ten months of this year.

The forecast for 2025 suggests that developers will remain keen on selling their existing projects. With the current interest rate environment likely to see a further reduction in mortgage rates next year, buyers will find lower installment ratios appealing. Coupled with price drops of about 30% or more compared to peak levels in previous years, first-time buyers—often referred to as "entry-level buyers"—will have better opportunities to purchase quality new properties at a reduced cost or trade up to older properties with larger floor areas at similar prices.

Examining the luxury segment, the market has outshone that of smaller units, benefitting from the government’s relaxed immigration policies for investment. Few new high-end developments have been adversely affected by price adjustments, with some even commanding record high figures for per-square-foot pricing in their areas. Analysts posit that the luxury property market will continue to exhibit stable and positive development into 2025.

The report also critiques the decreasing rental prices for industrial and commercial properties in the coming year. Such declines may impair the repayment capability on mortgages related to these assets, prompting developers and strategic investors to consider liquidating their holdings. This trend inevitably contributes to a less buoyant market atmosphere, with overall performance trailing behind that of residential properties. Various types of non-residential properties have experienced price drops in the range of 15% to 20%, while vacancy rates among office buildings remain elevated. The Aegis Group noted that the market has yet to fully absorb additional office space, combined with persistently weak demand, suggesting further downward adjustments for office prices and rents in 2025.

In the office property market, around a dozen cases of full-property transactions have emerged this year, with some of these properties originally intended for hotel use being repurposed as student accommodations. There is a notable imbalance in the supply of student housing, with demand significantly outstripping availability. Experts recommend that repurposing suitable office spaces into student accommodations could help quickly enhance bed supply, simultaneously enabling property owners to increase their asset values through strategic repositioning and redesign, ultimately improving return rates and sparking a more favorable atmosphere for the investment property market.