On September 5th, Morgan Stanley released a report, predicting that Hong Kong property prices will fall by 8% this year. With the support of the anticipated interest rate cut by the Federal Reserve, there is a chance that Hong Kong property prices will rise by 5% next year. The residential market is expected to benefit more from the interest rate cut compared to the retail and office property sectors. In addition, Ellen Zentner, Chief US Economist at Morgan Stanley, expects the Federal Reserve's federal funds rate to be reduced from the current 5.375% to 4.625% by the end of this year, and further decreased to 3.625% by June of next year. Nick Lord, a Hong Kong banking analyst, predicts that the Federal Reserve will reduce interest rates by 0.25% each time, resulting in a 0.125% decrease in the best lending rates. It is expected that by the end of next year, actual mortgage interest rates will decrease to 3.25%. As for the interbank offered rate (HIBOR) for 1-month term, it was around 4.5% in the first half of this year. It is expected to fall to 1.75% by the end of next year, reaching a level of 2.75%. Mortgage interest rates are about 4% (HIBOR plus 1.3%), which is still higher than the capped interest rate. Additionally, Morgan Stanley expects the current rental yield to be 3.2%. With the interest rate cut and the influx of talent from Mainland China affecting rental trends, the rental yield spread is expected to shift towards neutrality next year, attracting investment demand. Moreover, the affordability of mortgage payments by homeowners is expected to improve from the current 50% to 45%, which is a healthier level. Since 2021, interest rates have been the main factor causing a cumulative 30% decline in property prices. It is believed that Hong Kong property prices will reach a bottom and experience cyclical recovery around 2025, with an increase of 5%. Among Hong Kong property stocks, 60% of the debt is calculated based on floating interest rates. A 1% decrease in the interbank offered rate will lead to an average increase of 5% in profitability. Highly leveraged companies like New World Development (0017), Hysan Development (0014), Henderson Land (0012), and Kerry Properties (0683) will benefit, as well as companies with a high proportion of floating interest rates like Wharf Real Estate Investment Company Limited (1997).