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Peggy Sito

Twentysomethings seeking their own homes are giving the market a fresh look

When young twentysomethings start to buy their own homes, as is happening now in Hong Kong, they are clearly making a statement that market conditions are good for them. Not long ago, young homebuyers were unheard of in the market.

Thanks to highly flexible mortgage schemes from the Hong Kong Mortgage Corp  (HKMC) and other financial lenders, the average age of first-time homebuyers has fallen significantly over the past two years.

According to Hendrick Leung Lee-chung, Centaline Finance director and general manager,  young people of 22 and 23 started to show an interest in buying when the HKMC introduced its 95 per cent mortgage insurance plan in July 2004.

'The mortgage scheme has lowered the barriers to purchasing a flat and this is attracting the young people,' Mr Leung said.

The combination of generous mortgage offers, good salaries and the promise of rising rents was a strong stimulus for buyers, said Peggy Tam Lai-king, head of mortgage lending, Hang Seng Bank.

'It's not too difficult for a university graduate to buy an apartment,' Ms Tam said. 'Some flats in Tseung Kwan O cost around $3,000 per sq ft, and there are clubhouse facilities and good transport, all affordable and very attractive to young people.'

Mortgage broker mReferral said 21 per cent of those applying for its new home loans  in 2003 were under 30 years. The number rose to  23 per cent last year and  to 25 per cent in the first two months of this year.

Banks and lending organisations were also helping to widen the pool of home ownership with mortgage coverage that extended to small value properties

'Buyers of small value properties are not usually priority clients with bankers,' said Lawrence Wong Dun-king,  president of Many Wells Property Agent,  which provides brokerage services mainly in Tuen Mun.

'But today you can get a mortgage of up to 95 per cent, plus extra loans to cover legal fees and administrative costs for a home worth between $400,000 and $500,000.'

Financial lender Pan Asian Mortgage  is in partnership with Many Wells to provide a 99.9 per cent mortgage programme for buyers of properties valued at $500,000.

Noopy Ha Ling-chu,  Pan Asian vice-president, said buyers could make a down payment of just $25,000 for a flat valued at $500,000. She compared this to a down payment of $150,000 on a 70 per cent mortgage plan. The buyer could also get a loan of about $24,000 for incidental expenses that included legal fees, stamp duty, agency commission and Pan Asian service charges of about $17,000.

But if the buyer repaid the loan in 20 years, he or she would have to make a monthly payment of $3,435, about $1,000 more than those who opted for the 70 per cent mortgage plan.

Mr Wong of Many Wells said 30 per cent of his clients were aged below 30. The number was not  significant  during the market recession years of 1997 to 2003.  Home prices had surged about 70 per cent  since the middle of 2003, he said. 'We do see a trend of young people buying properties,' he said.

Property agents welcome the presence of young faces in the market, but they also have a few concerns. Mr Lee of Centaline was worried about how well organised young people were with their finances.  Although most young buyers were financially secure, with good jobs or strong family backing,  they could be vulnerable if they  were not in the habit of saving money, he said.

'It can be quite risky if they  don't have to pay a cent for their flats in the first two years with a second mortgage scheme,' he said.

Mr Leung added that many of the younger generation had forgotten how the market collapsed and prices plummeted during the Sars outbreak of 2003  and were not aware of the possibility of going into a state of negative equity.

Eddie Hui Chi-man,  a professor with Polytechnic University's  building and real estate department, said those seeking 'high-geared' mortgage plans were more likely to fall into negative equity.

'A 95 per cent mortgage creates an appetite to buy but  if house prices drop more than  5 per cent the buyer is already in negative equity,' he said.

Recent figures from the Hong Kong Monetary Authority show that the number of negative equity cases relating to residential mortgage loans  rose from 1,900 cases to about 11,000 cases in the last three months of last year.



Young, secure and raring to buy