In January, we published a report highlighting the signs of green shoots for Hong Kong’s (H.K.) economy. Ten months on, the signs of a recovery are more strongly evident, not least in the fact that economic growth in Q3 hit 3.8% on an annual basis, which is the strongest since 2018 (excluding the pandemic).

Moreover, after six years of stagnant or declining property values, there are now signs that a low is closer to hand, and that the real estate sector may be turning from a headwind to a tailwind for the economy. Transaction activity shows a clear improvement with the number of residential sales up 20% from January to October against 2024, signalling a return of buyer confidence.

The city’s property downturn has been one of its longest on record, yet such extended corrections are not unusual. After the Asian Financial Crisis of 1997 property prices fell for six straight years. The pattern then, as now, was clear: once macro conditions stabilise, Hong Kong’s real-estate markets can and do recover given fundamental strengths including institutional structure, world class financial infrastructure and dense connectivity to the Chinese Mainland and the world.

That historical lesson is highly relevant today. U.S. interest rates have been easing on the back of a slowing American economy, which determines H.K.’s monetary policy. At the same time China is pivoting toward supporting consumption growth. Both U.S. monetary policy and China’s economic growth have been headwinds in recent years, but a turn in both suggests the conditions are being put in place for a durable economic recovery in the city.