Savills has reported that Hong Kong's real estate market experienced further divergence in the second quarter of 2026, with the residential sector demonstrating resilience supported by mainland Chinese buyers, while commercial properties continued to undergo price revaluation.
During the first half of the year, total investment in non-residential properties with individual transaction values exceeding HK$50 million surged 120% year-on-year to HK$22.3 billion. Office buildings and hotels accounted for 67.6% and 21.6% of this investment total respectively, emerging as the dominant transaction segments. This shift indicates a market transitioning from downturn toward selective recovery, though buyers remain highly focused on asset quality, pricing, financing conditions, and stable cash flow.
Commercial property price adjustments have persisted. Grade-A office prices have fallen approximately 49% from their 2018 peak, while prime street shop prices have dropped about 65% from their 2013 high. Some properties under receivership have transacted at prices 35% to 56% below their original purchase prices or valuations. However, office investment activity has shown preliminary signs of stabilization, particularly concentrated in prime-location, high-quality core assets with long-term owner-occupier or investment appeal. The overall Grade-A office vacancy rate declined by 0.4 percentage points quarter-on-quarter to 14.8% in the second quarter of 2026.
The residential market has maintained steady demand. In the first half of 2026, mainland Chinese buyers accounted for approximately HK$107.1 billion in residential transaction value, equivalent to about 75% of the full-year 2025 level. Super-luxury home sales exceeding HK$100 million reached 134 transactions, up 91% from the same period last year, with mainland buyers involved in 69 of these deals.
The hotel and student housing sectors are exhibiting relatively sound fundamentals. As of May 2026, average hotel room rates had recovered to 98% of their 2018 peak, with second-quarter occupancy reaching 84%. Meanwhile, the number of non-local students in the 2024/25 academic year rose 97% compared to five years earlier, reaching approximately 92,000 students, creating a student accommodation bed shortfall of roughly 72,000 units, which continues to support conversion and investment demand.
Simon Tong, Director of Research and Consultancy at Savills, noted: "Hong Kong's market does not lack capital; the key issue now is that buyers have become more rigorous in their requirements for pricing and returns. As distressed asset supply increases, price pressure may persist in the short term, but more thorough asset revaluation will also help facilitate a new round of transactions. The market is expected to maintain selective recovery in the second half of the year, with capital allocation restrictions imposed by overseas investment regulations and the supply of receiver-led properties potentially being two important factors affecting market performance in the latter half of 2026. Capital will prioritize assets with reasonable pricing, superior quality, and stable cash flow support."
Charles Yuen, Managing Director of Investment at Savills, commented: "The significant rebound in the non-residential investment market in the first half of the year reflects that users, institutions, and overseas capital have begun seizing opportunities presented by price adjustments in quality assets. Among these, offices and hotels have attracted the most market attention, while hotels with conversion potential, serviced apartments, and student housing-related projects continue to draw long-term capital. However, the recovery is not broad-based, and investors will remain focused on core locations, quality properties, and projects with clear asset appreciation potential."