The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, March 26 (Reuters Breakingviews) - Shifting demographics is pulling Hong Kong's property market in two different directions. An influx of professionals from mainland China has propped up population growth and residential housing demand. Yet more pain lies ahead for the city's commercial landlords.

Hong Kong's property markets typically move in tandem. But in 2023, when home rental prices started to pick up, those for retail and offices continued to slump. Blame a stubborn oversupply: prime office vacancy is currently at 17%, according to HSBC, nearly double the level in 2017. Compounding the problem is the city's growing preference to shop online or across the border in cheaper cities like Shenzhen, which is eating into retail sales. Just this week, HSBC-owned Hang Seng Bank reported an 11% rise in substandard and credit‑impaired commercial real estate loans in the city, to HK$40.6 billion ($5.2 billion), in 2025. That prompted the lender to triple loan-loss provisions for this segment.

In contrast, primary home sales topped HK$55 billion so far this year, up 55% year-on-year, albeit from a low base, per real estate agency Midland. That's largely thanks to government talent schemes which have attracted some 270,000 mostly mainland Chinese professionals to the city in recent years. Those initiatives were launched following the pandemic and the enactment of a national security law, both of which helped spark an outflow of 200,000 locals and expatriates between 2020 and 2022. If many newcomers end up settling for longer, they could help support housing prices that are still a fifth below their 2021 peak.

Sun Hung Kai Properties 0016.HK, the city's largest local homebuilder by sales, has seen its stock rally 40% this year, lifting the $49 billion developer's valuation to its highest levels since 2007. Its lenders are turning optimistic too: this week, the group secured a HK$20 billion loan at its lowest borrowing cost in a decade.

Over time, Hong Kong's demographic boost should support retail spending and office demand. Moreover, a resurgence in deal and market activity in the financial hub should also help. Global banks from UBS to Citigroup plan to hire hundreds of private bankers, Bloomberg reported recently. For now, though, Hong Kong real estate has become a tale of two markets.

CONTEXT NEWS

Hang Seng Bank, a Hong Kong lender taken private in January by HSBC Holdings, reported on March 24 that substandard and credit‑impaired loans in its Hong Kong commercial real estate portfolio rose 11% to HK$40.6 billion in 2025.

The Hong Kong government has approved over 410,000 applications under various talent admission schemes, and more than 270,000 professionals have arrived in the city, Chief Executive John Lee told a forum on March 18.

(Editing by Robyn Mak; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))