Hong Kong's property market is experiencing a heartening transformation that's bringing renewed optimism to the city, according to a newly released report from Morgan Stanley. The US investment bank has upgraded the territory's property sector to "attractive," signaling confidence in a sustained recovery that's expected to continue through 2027.

The positive momentum is more than just a temporary uptick—it represents the beginning of an entirely new growth cycle for Hong Kong real estate. Morgan Stanley forecasts that home prices will climb approximately 10% during 2026, with additional gains anticipated in 2027, marking a significant milestone for the city's housing market.

What makes this development particularly exciting is the breadth of the recovery. For the first time since 2018, all three major property segments—residential prices, Central office rents, and retail rents—are projected to record positive year-on-year growth simultaneously. This comprehensive improvement demonstrates the strength and sustainability of the market's upward trajectory.

The recovery is already showing tangible results. Hong Kong's residential home prices have risen for six consecutive months through November, pushing the official price index to a 16-month high. This translates to an encouraging 3.5% cumulative increase throughout 2025, according to government data. The consistent monthly gains reflect growing confidence among both buyers and investors in the market's future.

The office sector is equally buoyant, with prime Central district rents increasing 1.6% in the fourth quarter alone. Vacancy rates across core business districts have been steadily improving since midyear, according to property consultancy Cushman & Wakefield, indicating robust demand from businesses looking to establish or expand their presence in Hong Kong.

This remarkable turnaround is being driven by several positive factors working in harmony. The all-round improvement in Hong Kong's broader economy is creating a favorable environment for property investment. Additionally, supportive policy measures from the government have helped catalyze the recovery, demonstrating a commitment to maintaining the city's status as a premier international hub.

Lower borrowing costs have also played an important role in making property ownership more accessible to residents, helping first-time buyers enter the market and existing homeowners to upgrade their living situations. This has contributed to the sustained momentum in residential sales.

While Morgan Stanley acknowledges that global economic factors continue to influence sentiment, the fundamental drivers of Hong Kong's property market remain strong. The city's unique position as a gateway between East and West, combined with limited land supply and steady demand, provides a solid foundation for continued growth.

For Hong Kong residents and investors alike, this new upcycle represents an opportunity to participate in the city's next chapter of growth. The positive outlook through 2027 suggests that the market has moved beyond short-term fluctuations into a period of sustained expansion, bringing welcome stability and prosperity to one of Asia's most dynamic property markets.