Hong Kong housing

Hong Kong’s record property prices push more millennials into mortgage debt

The city’s young people are taking on more debt amid record home prices, with a lot of help from dad and mom

PUBLISHED : Monday, 25 September, 2017, 7:02am
UPDATED : Monday, 25 September, 2017, 6:36pm

Hong Kong’s millennials are becoming better represented in the home buying market, taking up one in three new mortgages this year, a new report shows.

However, many agents say it is often their parents who are paying the huge deposits for the flats given the sky high prices of housing in the city.

Millennials – who are currently 23 to 37-years-old – accounted for 32 per cent of total new mortgages in the second quarter of the year, up from 19 per cent in 2013, making them the second largest age group after Generation X, that’s those aged 38 to 52, the report from credit bureau TransUnion has found.

Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker, says the biggest barrier for millennials to get their first foot on the housing ladder in Hong Kong is the down payment, which makes up at least 20 per cent of the home price, and so that’s why so many parents are now stepping in to help.

According to a recent survey Demographia, the city has just been ranked the world’s “least affordable” in which to buy a home for a seventh year running, with flats costing over 18 times annual median income.

“I’m scared that if I don’t buy now and with prices keeping going up, it will become even more difficult for me to afford a home,” said Elaine She, a Xiamen-native who moved to Hong Kong for postgraduate studies a decade ago.

She bought a second-hand flat in May with a mortgage of over HK$5 million (US$640,000), with her parents financing a considerable portion of the down payment.

Cheung Po-kin, a 27-year-old Hong Kong native, told South China Morning Post, he was in the same boat.

“Without the help of family, you I couldn't even think about buying a home,” he said after taking on a HK$5 million mortgage together with his older brother, after buying a new flat two months ago.

The Centa-City Leading Index, a gauge of used-housing prices, has already risen 11 per cent this year to a record high, but Wong acknowledged the government’s efforts to rein in the prices, which has partly contributed to the rise in millennial buying.

Since first-time buyers have been exempted from the 15 per cent stamp duty imposed in 2016, many parents have chosen to buy flats under their children’s names, she said.

The number of mortgage accounts per consumer dipped under to under 1.6 in the second quarter of this year, the fifth fall in as many quarters, the report by TransUnion said, with around 0.2 per cent of the 494,600 mortgage holders born after 1994.

The total number of new mortgages taken out rose 50 per cent to 26,309 in the second quarter of 2017 compared with the first quarter of 2016, as demand rekindled following a drop in home prices between late 2015 and the start of 2016.

The TransUnion report added that it considered millennials as the “least risky” mortgage holders, with over 70 per cent of them being given what it ranked as “super prime” scores.

Hong Kong’s fresh university graduates receive an average monthly salary of HK$14,685 (US$1,880) in their first job, a survey by jobs portal found in January.

But their average income dropped 15 per cent between 1995 and 2015, a separate survey by public policy monitoring groups New Century Forum and New Youth Forum showed.