Hong Kong’s property market is poised for a broad-based recovery as a strong upturn in the residential segment spills over to the struggling office and retail sectors, according to analysts.

Morgan Stanley upgraded its forecast for the city’s home prices to a 12 per cent increase this year from 10 per cent previously and anticipated another 5 per cent rise in 2027, it said in a report on Monday.

Likewise, the office property segment was likely to see some relief, with Hong Kong’s top business district of Central set to see rentals rise from a previous forecast of 3 per cent to 5 per cent, the US investment bank added. West Kowloon, the district seen as Hong Kong’s main cultural hub, is also tipped to see growing demand for office space.

Meanwhile, retail sales were buttressed by rising tourist numbers, a string of mega-events and the stronger yuan, leading to a higher forecast for sales this year, up 5 per cent compared with an estimate of 3 per cent previously, the New York-headquartered bank said.

As of the first quarter, shop rents in the city had declined 1.1 per cent from a year earlier. Morgan Stanley forecast that rentals would “turn positive by year-end” although for the entire year a 3 per cent decline was likely. In 2025, rents fell 10 per cent.

“We see office and retail following very strong home price increases in Hong Kong,” said Praveen Choudhary, head of Hong Kong and India property research at Morgan Stanley.