In light of China’s reopening and easing of Covid rules, Hong Kong’s property market will be on a path to recovery in 2023, according to property consultancy Colliers Hong Kong.  

The retail market in particular will reap the “best benefit,” Hannah Jeong, Colliers’ head of valuation and advisory services, told CNBC’s “Squawk Box Asia” on Thursday.

However, there are still some potential headwinds this year that may undercut Hong Kong’s recovery, Colliers said in its latest report. Those include continued geopolitical tension and a potential global recession.

“We are looking at a more cautiously optimistic view for 2023,” Jeong added.

“There will be different uncertainties from external factors but borders opening is surely the one of the booster[s] for many other sectors within the property market.” 

According to Colliers, the retail sector — especially the high street shop segment — will be the “first runner” in the post-Covid recovery in 2023 with both rents and prices. 

“We are looking at about an 8% increase year-on-year, in terms of the retail rental performance,” Jeong added. 

She said, however, this is still about 25% to 30% lower than pre-Covid levels.

Collier added in its report that despite China’s reopening, local consumption will remain “an important driver” for Hong Kong’s retail market in the next 12 months.

“The shifted shopping pattern of the Mainlanders over the last three years may paint a new picture to the new retail market sentiment,” it added. 

In the office sector, Grade A office rents will bounce back by 3% this year, said Colliers — thanks to “pent-up demand from Chinese and overseas companies.” 

Even so, Jeong said that Hong Kong’s office market still has a high vacancy rate, at 14.7%.

“But it’s not it’s not the end of the world because … compared with other peer cities, 8% to 10% is a generally reasonable number,” she added. 

Hong Kong’s home prices plunged to a five-year low in October as interest rates hikes pushed up borrowing costs. 

This resulted in a “softening of investment demand,” said Jeong, but the demand from homebuyers still exists. 

“Homebuyers … [have been] utilizing this time when market is softening, they can snatch the cheaper flats,” she added. 

“But in 2023, I think the interest rate … will continue to go up. We are looking at stabilization at least in the second half of this year.”

Just last month, Hong Kong raised interest rates by 50 basis points to 4.75%, following the U.S. Federal Reserve.

High costs of borrowing will dampen residential market demand and a “negative 5% to 10% downward adjustment” should hence be expected this year, Jeong said.