Hong Kong's property downturn may have bottomed out, with investor appetite for distressed assets and recovering home sales indicating a gradual rebound, the South China Morning Post reported on Friday, citing a JPMorgan researcher.

Karl Chan, the bank's head of Hong Kong property research, said the sector was stabilizing as expectations grew for faster US interest-rate cuts, which the city is set to follow under its dollar peg, according to the report.

Still, Chan flagged headwinds including elevated unsold inventory, weak sell-through rates at new launches, and a negative carry situation in which mortgage rates exceed rental yields, it added.

JPMorgan's base case is for Hong Kong home prices to climb 3%-5% in 2026, contingent on a recovery in China's economy and a sustained rally in the city's stock market, the report said.

In commercial property, Chan reportedly estimated 34% of listed developers' debt is high risk, though systemic liquidity concerns remain limited.

Office rents are expected to stay under pressure through 2026 before a potential turning point in 2027, while the retail sector is showing signs of stabilization as cross-border spending outflows ease.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)