Citi raises Hong Kong property forecast to 12% on supply crunch

Citi Research sees Hong Kong property prices rising 12% in 2026, upgrading its forecast from 8% as a supply crunch and tourism-driven retail recovery reshape the market.

Citi Research raised its 2026 Hong Kong property price forecast to 12% from 8%, citing a supply shortage and a retail recovery that is expected to push sales past HK$400 billion.

"Limited supply and strong tourism inflows are creating a structural floor under prices, with retail leading the recovery," said Ken Yeung, head of Hong Kong property research at Citi. "Sellable units are at a four-year low, and developer sales surged 95% in the first half."

New home sales volume in the first half of 2026 jumped 34% from a year earlier to reach a 22-year high, Citi data show. Developer sales climbed 95% over the same period. The bank estimates 2026/27 annual completions at 15,000 to 16,000 units, while average annual land supply from fiscal 2022 through 2026 stood at 15,400 units — keeping total inventory near a two-year low. Retail sales are forecast to exceed HK$400 billion, supported by tourist arrivals, steady non-discretionary spending, luxury demand, local economic expansion and a stronger Hong Kong dollar against the yuan.

The upgrade matters because it signals a structural shift in Hong Kong's property cycle after years of headwinds. Citi's preference order for the second half of 2026 places retail first, followed by Central office, residential and other office. The bank expects mall rents to begin recovering in the second half, following 13 consecutive months of retail sales growth, with rent adjustments bottoming out by 2027. Major landlords including Swire Properties Ltd., Hongkong Land Holdings Ltd. and Hysan Development Co. are already reporting positive rental reversions, with mall occupancy above 97%.

Supply Constraints Underpin the Bull Case

The supply picture is the most constrained in years. Sellable units sit at a four-year low and total inventory at a two-year low, while demand remains intact. Citi's analysis suggests the structural undersupply will persist through at least 2027, providing a buffer against any near-term market adjustments. July data showed a temporary pullback — primary sales fell 60% month over month in the first half and secondary registrations dropped 33% — which Citi attributed to a slower launch pipeline, equity market volatility, buyer caution over offshore investment rules and seasonal factors.

Retail Leads, Developers Follow

Citi's top picks reflect the retail-first thesis. Swire Properties Ltd. (1972.HK) and Link Real Estate Investment Trust (0823.HK) are preferred for their exposure to the retail recovery, with Citi also recommending an opportunistic approach to Wharf Real Estate Investment Co. (1997.HK). For residential exposure, Sun Hung Kai Properties Ltd. (0016.HK) is the top pick, supported by a strong sales pipeline and the prospect of dividend-per-share growth as earnings expand.

The last time Hong Kong saw a comparable supply-demand imbalance was in the early 2010s, when prices rose more than 100% over a five-year period. While Citi does not project a repeat of that magnitude, the current setup — limited new supply, robust tourism and a recovering retail sector — provides the strongest fundamental backdrop in years.

This article is for informational purposes only and does not constitute investment advice.