UOB Kay Hian
Date of Report: 18 September 2025
Hong Kong Property Market 2025: Policy Shifts Ignite Optimism for Residential, Caution for Landlords
Executive Summary: 2025 Policy Address Sets New Course for Hong Kong Real Estate
Hong Kong’s Chief Executive John Lee’s 2025 Policy Address signals a pivotal shift for the city’s real estate sector. The latest policy initiatives are notably positive for the residential property market, while the outlook for retail and office landlords remains neutral. Major changes include the expansion of the Capital Investment Entrant Scheme (CIES), moderation of the housing supply plan, and a renewed focus on population growth and tourism. UOB Kay Hian maintains a MARKET WEIGHT rating for both developers and landlords, with SHKP and Hysan as top picks, and a downgrade for New World Development (NWD) due to valuation concerns.
Policy Address Highlights: What’s Changed for 2025?
- Residential Market: Expanded CIES now covers residential properties valued HK\$30m-50m; expected to drive a rebound in high-value transactions.
- Land Supply: 10-year housing supply target moderated; Kau Yi Chau artificial island project suspended, North Metropolis regions prioritized for future development.
- Population Growth: Measures to encourage childbirth and boost non-local student intake; population growth and newborns both up, supporting market demand.
- Tourism: Continued focus on attracting tourists; no new direct support for local spending.
Capital Investment Entrant Scheme (CIES): A Game Changer for Luxury Residential
The 2025 Policy Address introduced two critical changes to the CIES:
- Maximum counted investment for non-residential properties raised from HK\$10m to HK\$15m.
- Permissible investment coverage for residential properties expanded from properties above HK\$50m to those above HK\$30m.
This expansion is expected to trigger a significant rebound in transaction volumes for properties in the HK\$30m-50m range, which had previously underperformed the market.
| Segment |
No. of Units (1H24) |
Value (HK\$m, 1H24) |
No. of Units (2H24) |
Value (HK\$m, 2H24) |
No. of Units (1H25) |
Value (HK\$m, 1H25) |
YoY Change (No. Units) |
YoY Change (Value) |
HoH Change (No. Units) |
HoH Change (Value) |
| Primary > HK\$50m |
223 |
23,535 |
243 |
33,093 |
292 |
32,254 |
30.9% |
37.0% |
20.2% |
-2.5% |
| Secondary > HK\$50m |
83 |
9,989 |
102 |
9,985 |
135 |
15,688 |
62.7% |
57.1% |
32.4% |
57.1% |
| Primary HK\$30m-50m |
254 |
9,760 |
243 |
9,197 |
169 |
6,392 |
-33.5% |
-34.5% |
-30.5% |
-30.5% |
| Secondary HK\$30m-50m |
195 |
7,374 |
157 |
5,932 |
187 |
7,155 |
-4.1% |
-3.0% |
19.1% |
20.6% |
Housing Supply Targets: Moderating to Meet Market Realities
- New 10-year target: 126,000 private housing units, down from 132,000 previously.
- FY2024/25 land supply slowed sharply, down 36% YoY to 8,930 units, only 68% of annual supply target met.
- Kau Yi Chau artificial island project suspended, shifting focus to North Metropolis, set to provide 3,000ha of new land.
| Fiscal Year |
Land Supply (Units) |
| FY14-15 |
25,500 |
| FY24-25 |
8,930 |
North Metropolis: Innovative Measures to Accelerate Development
The government is introducing new methods to fast-track North Metropolis region growth:
- Exploring “two-envelope approach” for tendering (industry-linked rather than just highest bidder wins).
- Allowing land owners to surrender land for offsetting payments during in-situ exchanges or large-scale disposals.
- Implementing “pay-for-what-you-build,” letting developers pay premiums based on actual GFA, rather than maximum planned GFA.
Implementation details will be closely watched by market participants.
Population Growth Initiatives: Demographics as a Demand Driver
- Tax allowance for children extended from one year to two years.
- Ceiling for non-local student enrolment at government-funded post-secondary institutions raised from 40% to 50%.
- Hong Kong’s population grew 0.1% YoY to 7.53 million in 2024, 0.2% higher than pre-pandemic peak; newborns rose 11% YoY.
Tourism: Strategic Focus but No Direct Consumption Stimulus
- Tourist numbers up 12% YoY in first 8 months of 2025.
- Focus areas: Yacht, mega-event, cruise, and ecology tourism development.
- No new consumption voucher or direct local spending stimulus announced.
Hong Kong Property Sector Ratings and Top Picks
UOB Kay Hian maintains MARKET WEIGHT for both developers and landlords.
| Company |
Ticker |
Recommendation |
Share Price (HK\$) |
Target Price (HK\$) |
| Sun Hung Kai Properties (SHKP) |
16 HK |
BUY |
96.20 |
106.90 |
| Hysan Development |
14 HK |
BUY |
16.27 |
17.84 |
Peer Comparison: Valuations and Forecasts
| Company |
Ticker |
Rec |
Price (HK\$) |
Target Price (HK\$) |
Upside (%) |
PE 2025E (x) |
Yield 2025E (%) |
ROE 2025E (%) |
Market Cap (HK\$m) |
Price/NAV |
| New World Development |
17 HK |
SELL |
8.25 |
6.90 |
-16.4 |
16.0 |
0.0 |
-2.5 |
20,762.2 |
0.1 |
| Sun Hung Kai Properties |
16 HK |
BUY |
96.20 |
106.90 |
11.1 |
12.1 |
3.9 |
3.6 |
278,766.5 |
0.4 |
| Kerry Properties |
683 HK |
HOLD |
21.98 |
22.80 |
3.7 |
14.9 |
6.1 |
1.8 |
31,899.7 |
0.3 |
| Wharf REIC |
1997 HK |
BUY |
23.64 |
28.50 |
20.6 |
11.4 |
5.6 |
3.2 |
71,776.4 |
0.4 |
| Link REIT |
823 HK |
BUY |
41.54 |
48.48 |
16.7 |
15.5 |
6.4 |
4.5 |
107,272.7 |
0.7 |
| Hysan Development |
14 HK |
BUY |
16.27 |
17.84 |
9.6 |
10.4 |
6.9 |
3.2 |
16,709.4 |
0.3 |
Company Analysis: Forecasts, Ratings, and Rationale
Sun Hung Kai Properties (SHKP)
- Rating: BUY (Top pick for developers)
- Target Price: Raised to HK\$106.90
- Outlook: SHKP’s Victoria Harbour project expected to benefit from expanded CIES; NAV discount lowered from 42% to 40% due to faster sales assumptions.
Kerry Properties
- Rating: HOLD
- Target Price: Raised to HK\$22.80
- Outlook: La Montagne project to gain from CIES expansion; NAV discount lowered from 69% to 67% reflecting improved sales.
New World Development (NWD)
- Rating: Downgraded to SELL
- Target Price: Raised to HK\$6.90
- Rationale: Targeted NAV discount raised to 75% after recent improvements in financing channels; however, valuation considered rich with gains already priced in.
Link REIT, Wharf REIC, and Hysan Development
- Ratings: Maintained
- Top Pick: Changed to Hysan
- Rationale: Hysan will benefit from tourism-focused policies and its Bamboo Groove project gains from CIES expansion.
Sector Outlook and Risks
- Residential segment supported by demand-side measures and moderate supply growth.
- Retail and office landlord recovery hinges on broader economic and tourism trends.
- Preference order: residential developers > retail landlords > office landlords.
- Potential sector catalysts include faster-than-expected US interest rate cuts.
Conclusion: 2025 Policy Address Sets the Stage for Recovery
The Hong Kong government’s 2025 Policy Address largely meets market expectations, balancing demand stimulus, supply moderation, and demographic growth. The expanded CIES is a particular boon for luxury residential transactions, while moderating supply and population inflow support sector resilience. UOB Kay Hian maintains a cautious but constructive stance, recommending select exposure to residential developers, with SHKP and Hysan as standout picks for the coming year.
