SVB collapse: Hong Kong property market, economy could benefit from expected pause in US interest rate increases

Five out of eight analysts in Hong Kong polled by the Post say they expect Fed to not raise interest rates on March 22

No rate rises will benefit Hong Kong’s property market and overall economy, ANZ economist says

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A slowdown in Fed rate increases means Hong Kong banks will also not be under pressure to increase their cost of funding, which should provide some relief to the city’s economy as well as its property market. Photo: Dickson Lee

Published: 10:00am, 14 Mar 2023Updated: 10:07am, 14 Mar 2023

Hong Kong’s property market – and overall economy – is expected to benefit from a potential pause next week in US interest rate increases, with the collapse of Silicon Valley Bank (SVB) triggering a crisis of confidence.

Five out of eight analysts in Hong Kong polled by the Post said they expected the US Federal Reserve to not raise interest rates during a Federal Open Market Committee (FOMC) meeting on March 22, a view shared by Wall Street lender Goldman Sachs.

Previously, the market widely expected the Fed would increase interest rates by 50 basis points next week. The tide has, however, turned after SVB was taken over by the US Federal Deposit Insurance Corporation on Friday because of liquidity concerns.

“In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting, with considerable uncertainty about the path beyond March,” Goldman said in a research note on Sunday.

A slowdown in Fed rate increases should provide some relief for the Hong Kong economy, which is trying to grow its way out of recession amid plunging home prices. Negative equity, where home values are less than their mortgages, rose almost 22 times to an 18-year high of 12,614 cases last year, as home prices dropped 15 per cent.