Morgan Stanley: Raises Hong Kong's full-year residential property transaction forecast, expects annual property prices to rise by up to 15%

Chairman Huang Jianye of MIDLAND HOLDING (01200) foresaw the latest trends in the property market after the shareholders' meeting, pointing out that the Hong Kong property market performed significantly better than expected in the first half of the year. Both new and second-hand markets saw an increase in transactions and prices rebounded significantly, reflecting a sustained recovery in the market. As a result, the annual residential property transaction forecast has been revised upward, with first-hand transactions increasing from the original 22,000 units to 23,000 units, and second-hand transactions increasing from 50,000 units to 57,000 units. The annual increase in property prices is expected to reach around 15%, approaching the upper limit of the forecast range at the beginning of the year. Huang Jianye stated that despite the escalation of geopolitical tensions in the periphery, property prices in Hong Kong have increased by about 9.29% since the beginning of this year. During the period, the increase in gold prices has dissipated, and the Hang Seng Index is still below the level at the end of last year. Among the main investment sectors, residential property prices have been the strongest performers, indicating that funds continue to flow into the residential market. In the first five months of this year, nearly 10,700 transactions were recorded for first-hand properties, and it is expected that this figure will reach 12,700 in the first half of the year, with a total amount of transactions potentially reaching HK$150 billion. Both the number of transactions and the amount are expected to reach a new high following the implementation of the first-hand sales ordinance. The second-hand market is also flourishing, with about 25,400 transactions expected in the first five months, reaching 30,900 transactions in the first half of the year, with a total amount of around HK$220 billion, setting a new five-year high in transactions and amounts. Huang Jianye pointed out that the current upward trend in the property market is mainly driven by the reallocation of funds and actual user demand. According to the statistics of the Hong Kong Monetary Authority, as of the end of April 2026, the total deposits of recognized institutions in Hong Kong reached HK$19.91 trillion, and the total amount of time deposits reached HK$11.11 trillion, both reaching new highs, reflecting ample market liquidity supporting the property market. With the improved market sentiment, buyers' confidence has significantly increased, and the accelerated pace of entry of investors and "new Hong Kong people" into the market has intensified market competition. Many local buyers have made faster decisions to enter the market in response to market conditions, further driving transaction performance upwards. Huang Jianye continued to point out that another characteristic of the current property market is that the performance of commercial properties lags behind that of the residential market. According to data from the research department of Midland IC & Commercial, 2063 commercial properties were registered in the first five months of 2026, an increase of 10.9% compared to the same period last year, reaching a new high in the same period over the past four years. While prices gradually found support, the increase in transactions in commercial properties was significantly lower than that of residential properties during the same period, reflecting a relatively slow pace of recovery in the commercial property market. He pointed out that the performance of commercial properties to some extent reflects changes in the overall economic structure of Hong Kong. Currently, the development of the financial sector is active, driving the demand for high-quality office space in the core business districts. Among the three major regions, the recovery pace of office buildings in Central District is relatively faster, with the vacancy rate of Grade A commercial buildings gradually decreasing and rent and sales prices bottoming out, with room for future growth. On the other hand, the office market in East Kowloon is constrained by relatively high supply, and prices are expected to remain flat in the short term.