Hong Kong's housing market has stabilized first, but conditions for replication in mainland first-tier cities remain insufficient

Overview

This report compares the recovery differences between Hong Kong's residential market and mainland China's first-tier cities after the latest property downturn. Hong Kong housing prices bottomed around mid-2025 after years of adjustment and have risen nearly 10% since 2Q25, while transaction volume also recovered; Shanghai, Beijing, Shenzhen, and Guangzhou, however, have yet to form a clear bottom, and some cities weakened again after a brief stabilization following the policy pivot in September 2024. The report argues that while Hong Kong and mainland first-tier housing prices historically showed high synchronicity, the current cycle's clear divergence indicates that structural factors such as local policy, demand composition, and market confidence matter more.

Core views

The key conclusion is that the Hong Kong experience cannot be simply extrapolated to mainland first-tier cities. Hong Kong's stability rests on four factors: first, more decisive demand-side policies, including the 2024 removal of several stamp duties and home-purchase restrictions; second, incremental demand from mainland talent, capital market activity, and high-net-worth buyers; third, Hong Kong's economic recovery has been driven more by local consumption and domestic demand, which transmits more directly to housing; and fourth, Hong Kong lacks the deep confidence scar caused by mainland developers' credit defaults, concerns over presale delivery, and the release of shadow inventory. Mainland first-tier cities have seen mortgage rates fall and down payment ratios decline, but demand remains constrained by employment conditions, housing price expectations, and inventory.

Analysis framework

The report uses a cross-market comparison framework, breaking down Hong Kong versus mainland first-tier cities across policy intensity, demand sources, macro transmission, expectation scars, rental yield, and inventory pressure, and uses housing price indices, year-over-year differences, PMI correlation, net rental yield, and inventory Z-scores to measure stabilization conditions. The focus is not to predict short-term prices for a single city, but to judge which conditions can support supply-demand rebalancing.

Methodology notes

• Supply-Demand FrameworkHousing Market Supply-Demand Rebalancing Analysis

  Net rental yield and inventory together anchor housing price stability

  The report treats net rental yield after mortgage costs as an indicator of investment attractiveness, and combines it with changes in inventory measured in months of new-home sales to assess supply-demand pressure. Hong Kong's net rental yield has turned positive and inventory has declined, so it is closer to stabilization.

• Policy ComparisonDemand-Side vs. Supply-Side Policy Breakdown

  Policy intensity and direction affect the pace of demand release

  Hong Kong has mainly adopted stronger demand-side easing, significantly lowering transaction taxes; mainland policy has been more gradual, while also balancing supply-side financing, project delivery assurance, and financial risk control, so the short-term lift to demand is weaker.

• Macroeconomic TransmissionPMI and Housing Price Correlation Analysis

  The type of economic recovery determines the strength of housing market transmission

  Using a sample from January 2023 to February 2026, the report estimates the correlation between housing prices and the composite PMI. The correlation is 0.6 for Hong Kong and 0.2 for mainland China, suggesting that Hong Kong's domestic-demand recovery provides stronger support to housing, while mainland growth is more export-driven.

• Statistical StandardizationInventory Z-Score

  Standardize inventory pressure using historical mean and standard deviation

  The report uses 2014-2025 as the sample period to calculate the inventory mean and standard deviation, measuring the extent to which inventory in each city from 4Q22 to 4Q25 deviates from the historical average.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hong Kong residential property

  Direct research object and positive case

  Strengths

  Demand-side policies were significantly relaxed, incremental mainland buyers were evident, net rental yields turned positive, inventory declined, and housing prices rebounded since 2Q25.

  Weaknesses

  Part of demand depends on cross-border capital, talent inflows, and capital market activity; if these factors weaken, the sustainability of the recovery may be affected.

  Comparison

  Compared with mainland first-tier cities, Hong Kong has more aggressive policy easing, a lighter confidence scar, and better supply-demand balance.

  Risks

  A renewed downturn in capital markets, actual talent relocation below expectations, or interest-rate and external shocks affecting homebuying demand.

• Mainland first-tier residential property

  A comparison object that can be referenced but not directly extrapolated

  Strengths

  Mortgage rates have fallen and down payment ratios have been reduced, leaving room for further gradual easing; Shenzhen has relatively low inventory, and Shanghai's local policies are more proactive.

  Weaknesses

  Net rental yields are still negative, overall inventory is above historical averages, housing price expectations are weak, and presale-delivery and developer credit issues have damaged confidence.

  Comparison

  Compared with Hong Kong, demand-side stimulus in mainland first-tier cities is more moderate, and economic recovery transmits more weakly to local housing demand.

  Risks

  Weaker employment, continued housing price declines, rising financial risks, and external shocks such as global energy supply disruptions or a further escalation in U.S.-China tensions.

• Mainland lower-tier residential property

  A negative extension judgment in the report

  Strengths

  It may receive marginal support from nationwide easing policies.

  Weaknesses

  Inventory is far higher than in large cities, net population inflows are negative, fiscal fundamentals are weaker, and the base for demand recovery is insufficient.

  Comparison

  Compared with Hong Kong and mainland first- and second-tier cities, lower-tier cities are much less likely to achieve rapid supply-demand rebalancing.

  Risks

  A prolonged inventory digestion cycle, intensifying local fiscal pressure, and continued deterioration in household expectations.

Key data

• Hong Kong residential price recoveryUp nearly 10% since 2Q25The report says Hong Kong residential prices bottomed around mid-2025, with transaction volume recovering in parallel.
• Duration of Hong Kong's prior declineAbout 40 monthsHong Kong's secondary-home price index began to recover after falling for about 40 months from its peak.
• Cumulative decline in mainland first-tier citiesAbout 40%Housing prices in Shanghai, Beijing, Shenzhen, and Guangzhou remain on a downward trajectory, with cumulative declines close to about 40% from their peaks.
• Hong Kong home-purchase tax reductionAbout 11-26 percentage pointsUsing a HK$10 million residential unit as an example, before the policy change local buyers paid about HK$1.5 million in taxes, and non-permanent residents up to about HK$3 million; after the change, the amount is about HK$370,000.
• Hong Kong talent program approvalsMore than 120,000 applicationsMore than 90% came from mainland China, but the report notes that not all approved applicants ultimately moved to Hong Kong.
• Mainland buyer share in Hong Kong luxury marketNearly 50%Rising participation from mainland buyers has supported Hong Kong's housing market, especially the luxury segment.
• Correlation between housing prices and the composite PMIHong Kong 0.6, mainland China 0.2The sample period is January 2023 to February 2026, reflecting differences in how economic recovery transmits to housing markets.
• China urban vacancy clueAbout 20%The report cites academic and industry research that China's urban housing vacancy rate was about 20% in 2020, used to illustrate shadow inventory pressure.
• Timing judgment for mainland housing stabilizationNext 1-2 yearsThe report expects more first- and second-tier cities to achieve localized housing price stability, with Shenzhen and Shanghai likely to lead.

Impact & implications

For investment and macro judgment, the rebound in Hong Kong's housing market is more like a localized recovery under special conditions than a direct leading indicator for a broad reversal in mainland first-tier cities. Mainland large cities may still stabilize gradually under continued easing, but the path will be slower and more dependent on policy increments, inventory digestion, and expectation improvement. If housing prices fall sharply or financial risks intensify, policy support may increase; otherwise, gradual easing will likely remain the main approach. The implication for lower-tier cities is more negative, because high inventory, population outflows, and fiscal pressure make it difficult for them to replicate the stability path of large cities or Hong Kong.

Risks

• If mainland housing prices continue to fall, buyer expectations could weaken further and more shadow inventory may be released.
• Developer credit risk and concerns over presold-home delivery may continue to suppress demand for new homes.
• High inventory, population outflows, and weaker fiscal fundamentals in lower-tier cities may weigh on the national property recovery.
• If global energy supply is disrupted for an extended period or U.S.-China tensions escalate again, leading cities such as Shenzhen and Shanghai may also be affected.
• Hong Kong housing depends on mainland buyers, talent inflows, and capital market activity; if related demand falls back, the recovery momentum will weaken.

What to watch

• Whether mainland first- and second-tier cities continue to ease purchase restrictions, down payment ratios, and mortgage rate policies.
• Changes in Shenzhen inventory and the implementation intensity of Shanghai's local policies such as housing acquisitions and relaxed purchase restrictions.
• Whether net rental yields turn from negative to positive, and the relative movement of rents versus mortgage costs.
• New-home sales in months, inventory Z-scores, and the pressure from shadow inventory release.
• Mainland residents' housing price expectations, confidence in presold-home delivery, and developer credit events.
• Hong Kong IPO activity, mainland buyer share, and the actual relocation of talent-program applicants.