HONG KONG, Feb 25 (Reuters) - Private home prices in Hong Kong rose 0.5% in January, the eighth consecutive month of increase, strengthening signs of a housing recovery as analysts forecast prices to jump at least 10% this year.

Home prices edged higher in January from December on improved economic sentiment, Rating and Valuation Department data showed on Wednesday, following a revised 0.4% increase in December.

Residential prices in Hong Kong, among the world's least affordable cities, climbed 3.7% in 2025, the first increase since they peaked in 2021. Prices have tumbled nearly 30% over the past five years, weighed down by higher mortgage rates, subdued economic prospects and reduced demand as strict COVID-19 policies and national security laws prompted an exodus of professionals.

Over the past week, J.P. Morgan revised up its 2026 home price growth forecast to 10% to 15%, from 5% to 7% previously, citing a resilient stock market, strong demand from mainland Chinese buyers and lower inventory, while Goldman Sachs raised its growth forecast to 12%, from 5%.

Morgan Stanley last month also forecast a 10% rise this year supported by increased investment demand and strong rental trends.

"We believe the housing market has just transitioned from 'early-stage recovery' to 'expansion'," Karl Chan, J.P. Morgan head of Hong Kong property research wrote, citing a more than 10% rebound in home prices since a trough in March 2025.

The official home price index tracks the secondary home market. In the primary market, Chan said developers have raised prices by 4% to 5% in the past few months, and reduced discounts by 5% on average, suggesting a more optimistic outlook.

Developers have also become more active in land auctions. Kerry Properties 0683.HK won a land parcel in eastern Hong Kong Island earlier this month at a price 17% above market estimates.

Hong Kong's Hang Seng Properties Index .HSNP has gained more than 20% so far this year.

Goldman Sachs last week upgraded Henderson Land 0012.HK and Sino Land 0083.HK to "Buy" on their leverage to the housing upcycle, and downgraded CK Asset 1113.HK to "Neutral" on its smaller exposure to the city's residential sector.

Hong Kong's government has removed curbs on property purchases and relaxed ratios on down payments since 2024 to support the sector - a core pillar of the economy.

Major Hong Kong banks lowered interest rates in October, the fifth cut since September 2024, following easing by the U.S. Federal Reserve.

Hong Kong's monetary policy moves with the U.S. as the city's currency HKD=D3 is pegged to the greenback.

(Reporting by Clare Jim; Editing by Kate Mayberry)

((clare.jim@thomsonreuters.com;))