Gen-Zs in their 20s are fastest-growing group of loan borrowers, spurred by cheap and easy money

Generation Z, the section of the population born in the mid-90s, was the fastest-growing segment of borrowers in Hong Kong during the first quarter, according to data by the credit report company TransUnion.

Loans by Gen-Z borrowers, the oldest of whom is 23 this year, soared by 78.5 per cent from last year, according to TransUnion’s data comprising 20 million accounts and 5.4 million customers. Total loans grew 1.9 per cent during the quarter compared with 2017, driven mostly by increases in credit extended to the younger segment of the population.

“The immense growth by the youngest generation in such a short period is likely just the beginning of a transformative shift in the Hong Kong consumer credit market,” said Brendan Le Grange, director of research and consulting for TransUnion Hong Kong.

Gen-Z and their predecessors the Millennials - the generation that came of age around the second millennium, now in their late 30s - have turned into the biggest borrowers of the economy, spurred by the proliferation of smartphone-enabled credit facilities and low interest rates.

Banks, retailer and property developers have had to adjust their products and marketing strategies to appeal to these two segments of the population, which are now occupying the mainstay of consumption of everything from appliances to insurance and real estate.

Personal loans taken out by Millennials rose 10.7 per cent during the first quarter, the second-highest age group. On the higher end of the spending spectrum, millennials were the biggest buyers of new-built homes in Hong Kong in the past few months, overwhelming projects such as New World Development’s Fleur Pavilia apartments in North Point, and Henderson Land’s Cetus.Square Mile project in Mong Kok.

“Millennials are transitioning into mature borrowers, from being up-and-coming consumers, as many of the older members of this generation are in their late 30s with substantial income levels,” said Le Grange.

The momentum injected by younger borrowers is expected to keep pace, and may grow by at least another 50 per cent, according to an estimate by Hantec Pacific’s Hong Kong managing director Gordon Tsui, without giving a time frame for his forecast.

Younger consumers may lack financial literacy, and may be susceptible to letting their guard down in the low-interest rate environment, Tsui said.

Credit card balances increased by 5.2 per cent in the first quarter, driven by an increase in retail spending in luxury goods, electronic gadgets and consumer products, Le Grange said. Unsecured credit balances by Millennials increased 7 per cent in the first quarter, while those taken by Gen-Z borrowers surged 63 per cent, Le Grange said.