Hong Kong’s real estate market has steadily improved, with Henderson Land Development (00012.HK) potentially emerging as one of the key beneficiaries.

According to a HSBC Global Research report, Hong Kong’s property market has steadily improved, albeit at a slower pace than expected, with transaction volumes showing steady improvement. Based on the current rate of activity, primary market transactions may exceed the bank’s expectations, growing 13% year-on-year to 19,000 units, reaching a five-year high. The recent interest rate cut by the Federal Reserve, along with lower effective mortgage rates, could support the property market by reducing holding costs.

The bank notes that its economists predict two additional interest rate cuts by the Federal Reserve: one in December 2025 and another in March 2026, each by 25 basis points, which should benefit the recovery of Hong Kong’s property market. Although recently completed inventory might pose some challenges for real estate developers, the affected companies are expected to gradually shift their sales strategies, balancing focus between transaction volumes and profit margins rather than solely deleveraging. These measures are expected to translate into higher projected earnings for 2026 to 2027.

HSBC Research highlights three key opportunities going forward: (Opportunity 1) Undervalued stocks with attractive dividend yields. With the anticipated continuation of the rate-cutting cycle, the bank sees opportunities in companies offering good dividend yields (approximately 7%) alongside improving fundamentals, such as Henderson Land (00012.HK) and CK Hutchison (00001.HK). Henderson Land could emerge as one of the key beneficiaries of the property market recovery cycle (“Buy” rating, target price HKD 34.2, forecasted dividend yield for next year at 6.6%, trading at a 48% discount to net asset value per share), while the bank expects improving earnings and dividend prospects for CK Hutchison (“Buy” rating, target price HKD 60, forecasted dividend yield for next year at 6.7%, trading at a 64% discount to net asset value per share).

(Opportunity 2) In the bank’s view, capital recycling initiatives should help unlock value from a pure asset ratio perspective. Hysan Development (00014.HK), through the accelerated capital recycling via the sale of Bamboo Grove, could provide better dividend certainty. Hysan is rated “Buy” with a target price of HKD 18.6.

(Opportunity 3) Stocks with new growth momentum: Swire Properties (01972.HK) has several commercial projects scheduled to open in phases starting from 2026, laying a solid foundation for rental income growth. Swire is rated “Buy” with a target price of HKD 23.9. Meanwhile, Hang Lung Properties (00101.HK) is expected to see a new source of rental income following the completion of the Hangzhou Westlake 66 project and is rated “Buy” with a target price of HKD 9.2.