Would you buy your children a flat in Hong Kong? Seven out of 10 parents in the city say they would
Parents in the world’s most expensive city have paid an average of HK$900,000 to help their children onto the property ladder, a new study has found
Seven out of every 10 Hong Kong parents are willing to give their children financial assistance to buy a home, according to a survey released on Thursday.
Parents who have already done so have forked out an average of HK$900,000 to help their offspring onto the property ladder, while one generous parent contributed HK$10 million, the survey by AIA MPF found.
The findings underline how the “Bank of Mum and Dad” has become a major source of funds for young first-time buyers in the world’s most expensive housing market.
The survey, commissioned by AIA MPF in August, targeted just over 1,000 respondents aged between 18 and 65 who have an MPF account. The MPF (Mandatory Provident Fund) is Hong Kong’s compulsory retirement pension scheme.
The city’s skyrocketing home prices have left many young Hongkongers unable to afford their own home without help from their parents.
Hong Kong’s secondary home prices rose for a 17th straight month in August. Data from the Hong Kong Monetary Authority showed the average income-gearing ratio, or debt-to-income ratio, reached 75 per cent in the second quarter of this year, much higher than the long-term average of about 50 per cent since 1996.
In further evidence that the property market is still red-hot, more than 13,000 prospective buyers swamped Sun Hung Kai Properties’ “Wings at Sea” project in Tseung Kwan O on September 30 to snap up 400 newly released flats. The apartments went for an average of HK$14,000 per square foot, a record for the Lohas Park area of the city.
About half of those queuing up were first-time buyers receiving help from their parents, according to Louis Chan, Asia-Pacific vice-chairman and managing director for residential sales at Hong Kong property agent Centaline.
HKMA figures highlighting the trend for younger buyers to rely on their parents to buy property triggered a recent warning from chief executive Norman Chan Tak-lam that it was “very irrational” to enter the market based on expectations that home prices would never go down.
Despite his remark, the AIA survey showed 70 per cent of Hong Kong parents are prepared to give their children the financial support they need to buy a property, while 53 per cent said they were willing to extend the mortgage on their existing home to finance their children.
Half of all respondents believe helping their children buy a home is more important than their own retirement plan.
“We cannot fault parents for caring, but they should pay attention to the potential risks that arise when they neglect to prepare for their own retirement,” said Stephen Fung, chief executive of AIA MPF.
Seemingly at odds with the old Chinese saying about the merits of “raising a child to prepare for retirement”, 71 per cent of younger respondents admitted they have difficulty in making ends meet and cannot support their parents in retirement.
Rather, the same survey showed half of Hong Kong parents are required to give money to their children, even those who have a full-time job.
The findings echo a separate global survey by HSBC released last month which showed some 60 per cent of Hong Kong parents are still giving their children money well into their 30s. The same trend was seen in other markets.
The AIA survey found 84 per cent of respondents consider buying a home to be the best way to prepare for retirement, while 85 per cent said they would buy a flat regardless of the size. Such views have led parents to support their children to buy a flat at any cost.
This type of thinking has also prompted some commentators to urge the government to allow employees to use their MPF contributions to buy property. Fung, however, said employees should consider retirement investments other than just property.
“Retirement planning needs to take care of the daily lives of the retiree, ranging from a home and clothes to meals and medical expenses. Buying property solves the need for somewhere to live but there are other aspects of daily life after retirement,” Fung said.