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Welcome to Thoughts on the Market. I'm Praveen Chaudhary, Morgan Stanley Head of Asian Gaming and Lodging and Hong Kong, India Real estate Research. Today, a look at the market that global investors often watch but may not fully appreciate. Hong Kong Real estate It's Tuesday, January 27th at 2pm in Hong Kong. Why should investors in New York, London or Singapore care about trends in Hong Kong property? That's easy to answer because Hong Kong remains one of the world's most globally sensitive real estate markets. When cycle turns here, it often reflects and sometimes predicts broader shift in liquidity, capital flows and macro sentiments across Asia. And right now, for the first time since 2018, all three major Hong Kong property segments, residential prices, office rents in the central district of Hong Kong and retail sales are set to grow together. That synchronized upturn hasn't happened in almost a decade. What's driving this shift? Residential real estate is the engine of this turnaround. Prices have finally bottomed after a 30% decline since 2018, and 2026 is shaping out to be a strong year. We actually expect home price to grow more than 10% in 2026 after going up by 5% in 2025, and we think that it'll grow further in 2027. There are three factors that gives us confidence on this out of consensus call. The first one is policy. Back in February 2024, Hong Kong scrapped all extra stamp duty that had made it tougher for mainland Chinese or foreign buyers to enter the market. Stamp duty is basically a tax you pay when buying property or or even selling property. And it has been a key way for government to control demand and raise revenue. With those extra charges gone, buying and selling real estate in Hong Kong, especially for mainlanders, is a lot more straightforward and penalty free. In fact, post the removal of the stamp duty, percentage of units that has been sold to mainlanders have gone to 50% of total. Earlier it used to be only 10 to 20%. Why is it non consensus? That's because consensus believes that Hong Kong property price can't go up when China residential outlook is negative. In mid-2025, consensus thought that the recovery was simply a cyclical response to a sharp drop in the Hong Kong interbank offered rate or high bar. But we believe the drivers are supply, demand mismatch, positive carry as rental go up but rates go down and Hong Kong as a place for global monetary interconnection between China and the world that's still thriving. Second, demand fundamentals are strengthening. Hong Kong population turned positive again, rising to 7.5 million in the first half of 2025. During COVID we had a population decline. Now talent attraction scheme is driving around 140,000 visa approvals in 2025 which is double of what it used to be pre Covid level. New household formation is tracking above the long term average and mainland buyers are now a powerful force. The third factor is affordability. So after years of decline, the housing prices have come to a point where affordability is back to long term average. In fact the income versus the price is now back to 2011 level. You combine this with lower mortgage rate as the Fed cut moves through and you have pent up demand finally returning. And don't forget the wealth effect. Hang Seng index climbed almost 30% in 2025. That kind of equity rebound historically spills over into property buying as the recovery in residential real estate picks up speed. We are also seeing a fresh wave of optimism and actions across Hong Kong office and retail markets. So big picture Hong Kong property market isn't just stabilizing, it's turning a 10% or more residential price rebound, a central office market finding its footing and an improved retail environment all in the same year marks the clearest green lights this market has seen since 2018. Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today.