CBRE Group Inc (CBRE) has reaffirmed its projection for Hong Kong residential property prices to increase by 5% to 10% this year. The firm also anticipates residential rents will climb 5% to 8%, potentially reaching an all-time high.

According to data from Hong Kong's Rating and Valuation Department, the private domestic price index for May stood at 321.9 points, marking a 1.4% month-on-month increase. This represents the twelfth consecutive month of growth, with a year-on-year rise of 12.4%, reaching its highest level in over two years. Prices have accumulated a 7.44% increase over the first five months of the year.

Given that prices have already risen by approximately 7.4% this year, the scope for further significant gains in the latter half is seen as limited, with the market potentially entering a consolidation phase. Recent adjustments in the Hong Kong stock market may also dampen investor sentiment. The combination of these factors is expected to temper investment demand, which could lead to a decline in residential transaction volumes in the coming months.

Key Factors for the Rental Market

In contrast, the fundamentals of the rental market remain robust. Ongoing government policies continue to attract talent to Hong Kong, while a steady influx of non-local students provides sustained support for rental demand. The third quarter of the year is expected to see a further uptick in leasing activity, as the summer period traditionally coincides with students returning to the city and corporate relocations.

Consequently, CBRE Group Inc forecasts residential rents in Hong Kong to increase by 5% to 8% this year, with the potential to set new historical records.