At the start of the new year, residential property prices rose by about 3% in 2025, showing that a full recovery is still some way off. As for commercial and industrial properties, rents and transaction prices showed limited signs of rebounding, while vacancy rates remained elevated in some sectors. For the shop market, it continues to face formidable challenges. Online shopping is widespread, plus Hong Kongers heading north for food & beverage services and consumption; the advent of new consumption patterns has plunged the retail market into difficult times. The emergence of pre-made dishes is further disrupting the traditional catering industry.
In the past three years, Chinese consumers shifting from conspicuous consumption to rational consumption has led to a drop in shop rents and an increase in vacancy rates in Hong Kong's central business districts. On the other hand, China's economic downturn has also led to a sharp decline in tourist spending in Hong Kong. In addition, the northbound consumption trend of Hong Kong residents is gaining momentum; local retailers are struggling as cross-border spending intensifies. This has resulted in persistently high vacancy rates for prime retail shops. Finally, rents and transaction prices have fallen accordingly.
In early 2023, Shenzhen reopened the border. At that time, many investors believed that shop prices would be driven up by the influx of Chinese tourists. Thus, they bought those premises at the beginning of that year. Amongst those shop premises, ground-floor shops suitable for the catering industry were the most popular. Since the border reopening, Hong Kong residents have flocked to the mainland for consumption, leading to sharply declining demand in the local catering industry. What was once considered a very safe neighborhood retail investment has finally turned into a deadly trap for investors.
As Hong Kong consumers are increasingly value-driven, they head north for consumption during short breaks and then travel abroad for extended vacations. As a result, the turnover of the catering industry has dropped significantly; restaurant owners have been forced to use pre-made dishes to cut costs. Locally bound consumers found that food quality declined; they eventually chose to head north to Shenzhen for consumption. In this vicious cycle of changing consumption patterns, a wave of closures in the catering industry seems inevitable.
Faced with this grim reality, some shop owners are still unwilling to lower rents to retain tenants, resulting in persistently high vacancy rates for ground-floor shops. Once large shops become vacant, it is extremely difficult to find replacements, leading to many ground-floor shops in Mong Kok and Tsim Sha Tsui staying vacant for extended periods.
In 2026, geopolitical tensions have increased. Disputes between China and Japan, along with ongoing frictions in the Taiwan Strait, continue to raise concerns. Hong Kong's fiscal deficit has not fully improved, and non-performing loans in the commercial and real 
estate sectors have risen. Hang Seng Bank's impaired loans stood at around HK$55 billion by mid-2025. The unemployment rate has shown a gradual upward trend, and bankruptcy cases increased last year. In 2025, hundreds of new home buyers forfeited deposits, higher than in previous years. In early 2023, a real estate KOL predicted a 15% increase in property prices that year after lifting border restrictions. At the end of 2025, similar optimistic predictions for 2026 emerged. If anyone believes in such forecasts, they might consider entering the market to avoid missing potential opportunities—though risks remain high.
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