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Nicholas Spiro

The Hong Kong Monetary Authority, the city’s de facto central bank, probably anticipated the rise in US interest rates last week. However, it is unlikely it foresaw the extent to which the Federal Reserve shifted in a hawkish direction.
Even Fed watchers were surprised by the unanimous vote to increase borrowing costs and the unambiguous signal that the central bank plans to raise interest rates further in the coming months.
While the HKMA, which moves in lockstep with the Fed to safeguard the local currency’s peg to the US dollar, followed its US counterpart by raising borrowing costs for the first time since 2023, the city’s commercial banks have yet to increase their prime lending rates.
Given that the Fed’s move almost certainly marks the beginning of a tightening cycle, it is only a matter of time before mortgage rates in Hong Kong start to rise again. When Morgan Stanley called the bottom of Hong Kong’s housing market in June last year, it said the uncertain outlook for US monetary policy could “remain an overhang in the property market”.
The question is whether the underpinnings of the recovery in the residential and commercial markets are strong enough to withstand higher interest rates. The Fed’s hawkish turn coincides with another policy headwind that contributed to a slowdown in housing prices and sales in the last few months: Beijing’s clampdown on outbound investment, which limits mainland buyers’ ability to fund property purchases in Hong Kong.

Were investors and advisers too optimistic about the recovery? Not necessarily. First, the narrative around Hong Kong real estate was so bearish for so many years that any improvement in the performance and outlook for the market was bound to have an outsize impact on sentiment.
Moreover, the speed and scale of the revival in the city’s capital markets since the beginning of last year have overshadowed the comparatively modest improvement in the fundamentals of the property market. While second-hand home values have risen 20 per cent since June 2025, they are still 15 per cent below the August 2021 peak. Furthermore, although commercial property transaction volumes this year have almost reached the level for last year as a whole, they are just 17 per cent of 2018 volumes, data from CBRE shows.
Second, interest rates are just one of several determinants of the performance of real estate markets. More important factors include supply-demand dynamics, the liquidity and depth of investment markets, economic and geopolitical resilience, policy support and stability, the talent pool and the quality of infrastructure.
Even though Hong Kong recorded one of the strongest increases in commercial property investment activity in the Asia-Pacific in the first half of this year, transaction volumes in Singapore were more than double those in Hong Kong.
“Investor sentiment towards Hong Kong has materially improved,” said Tim Graham, global lead of international and strategic capital in JLL’s capital markets business. However, “the strength and depth of the Singapore market have been a bigger driver” of investment in the region.
Even so, the reassertion of Hong Kong’s role as China’s global financial hub has been a crucial underpinning of the recovery in the property market. The influx of mainland Chinese capital and talent has proved a boon for the luxury residential, office and nascent student housing markets.

In the second quarter of this year, Hong Kong was the second most actively traded market for sales of homes worth US$10 million or more among 12 leading residential markets around the world, data from Knight Frank shows. Furthermore, rents for Grade A offices in Central grew 12.7 per cent, the fastest rate among central business districts in leading cities in the Asia-Pacific.
Third, the biggest challenge facing Hong Kong’s real estate industry in the coming years is policy delivery. The government’s first-ever five-year plan, released alongside its annual policy address on September 16, prioritises innovation as a new growth engine, putting the Northern Metropolis at the core of a growth strategy to create a new ecosystem spanning technology, education, talent, industrial policy and private capital.
While the sweeping economic blueprint could spur demand for residential and commercial property, regulatory and infrastructure bottlenecks need to be overcome to attract residents, occupiers and investors to the region.
Hannah Jeong, head of valuation and advisory services at CBRE in Hong Kong, said the acid test will be whether the plan can “attract real capital, whether the transport milestones hold, and whether the talent the university towns are designed to attract actually chooses to live and work in the Northern Metropolis”.
The Fed’s hawkish pivot adds to the uncertainty over the strength of the recovery in Hong Kong’s property sector. Yet at least there is a recovery, and a strong one in parts of the market. A broader-based and durable upturn will require an improvement in fundamentals and effective policy support. The Fed is not the decisive factor.


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Hong Kong property

People walk past a real estate agency in Telford Plaza, Kowloon Bay, Hong Kong on August 16. Photo: Karma Lo

Buyers line up on May 9 as Sun Hung Kai Properties launches 154 units at its Lime Spark project in Tsuen Wan. Photo: Eugene Lee

The Hotel Cozi Oasis in Tsuen Wan on April 29. The hotel ceased operations in May after eight years in business, with China Resources Longdation acquiring the site with plans to redevelop it into student housing. Photo: Jelly Tse

Hong Kong property market gets reprieve on rates, but position remains precarious

A woman walks past a real estate agency office displaying advertisements for residential listings in Telford Plaza, Kowloon Bay, on August 16, 2026. Photo: Karma Lo

Colliers will maintain its forecast for residential prices to rise between 8 and 10 per cent this year. Photo: Karma Lo

Gold rebounds after Fed rate rise as banks back long-term demand outlook

Gold prices have soared over the past couple of years amid rising geopolitical tensions and concerns over US debt levels. Photo: Shutterstock

Which overseas property markets will be the winners and losers if Fed raises US rates?

Real estate agents’ signs at a sold home and homes for sale in London last month. Photo: EPA

Homes for sale in Hong Kong advertised in a real estate agency’s window last year. Photo: Antony Dickson

Opinion

Hong Kong Opinion

Property

Business

Higher interest rates may dampen momentum, but solid demand, improving sentiment and effective policy execution will prove more decisive


Higher interest rates may dampen momentum, but solid demand, improving sentiment and effective policy execution will prove more decisive.


Hong Kong economy

Asia housing and property

Interest rates

United States

China

Singapore

Hong Kong

Hannah Jeong

CBRE Hong Kong

Morgan Stanley

Knight Frank

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

The View

Why a hawkish US Fed won’t derail Hong Kong’s property recovery

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Higher interest rates may dampen momentum, but solid demand, improving sentiment and effective policy execution will prove more decisive

Higher interest rates may dampen momentum, but solid demand, improving sentiment and effective policy execution will prove more decisive