Hong Kong’s investment market showed a significant rebound in Q2 2025, supported by a strong equity market performance, a temporary easing in funding costs, and wider asset discounts. Investor confidence improved, leading to a visible acceleration in transaction activity. Although the overall transaction value still recorded a year-on-year decline, transactions from May to August accounted for the majority of annual activity, reflecting a gradual recovery in market sentiment, according to Savills in its Market in Minutes – Hong Kong Investment report of September 2025.
- Strong Stock Market Boosts Investment Sentiment: The Hang Seng Index recorded a 21% gain by the end of June — its best performance since 2021. This drove a 94% year-on-year surge in securities sector revenue and indirectly lifted sentiment in commercial real estate investment.
- End-Users Lead the Market: From January to August 2025, end-users accounted for 52% of large-scale transactions, driven primarily by self-use demand, reflecting long-term operational confidence. One example is a securities firm acquiring the Virtus Medical Tower as its headquarters.
- Scheme Catalyses Asset Transformation: The Hostels in the City Scheme encouraged the conversion of hotels and serviced apartments into student accommodation, spurring related transactions such as the sale of Hotel Ease Mong Kok (HK$435 million) and The Nate in Tsim Sha Tsui (HK$272 million).
- Retail Property Transactions in the HK$30M–HK$100M Range Gain Momentum: These assets typically offer a return of around 4% to 6%. With tourism recovery and rental adjustments, investment demand has picked up, focusing on core-district shop and select trophy assets. While high-value deals remain limited, competition is intensifying for assets with stable rental income and quality tenant mixes.
- Strategic Acquisition Opportunities in the Office Market: Prices for stratified office units have dropped 50%–60% from their 2018 peak, attracting interest from educational institutions, professional associations, and public organisations.
- Savills Forecasts for the second haf of 2025: Prices for Grade A offices are expected to decline by 5%, while prime street shop prices may see a slight drop of 0%–5%.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented, “The Hong Kong investment market experienced a significant rebound in Q2/2025, fueled by strong equity market performance and a temporary reduction in funding costs, which collectively enhanced investor confidence and transaction activity. While end users continued to be the primary contributors, there was also a notable increase in cross-border capital, predominantly driven by Mainland funds.”
Mr. Peter Yuen, Managing Director, Investment & Sales of Savills said, “Financially constrained property investors and mid-sized developers are expected to continue offloading discounted assets, which may attract both local and international opportunistic capital. Strategic buyers are actively seeking asset repositioning opportunities in sectors such as student housing, data infrastructures, and mid-market retail properties. Meanwhile, end-user acquisitions in the office sector will continue to provide solid support for overall transaction volume.”