Bricks and Mortar

Young homebuyers in China can't be too proud to accept parents' help

Concerns grow as the mainland's elderly are using life savings to make down payments

PUBLISHED : Monday, 14 April, 2014, 11:52am
UPDATED : Monday, 14 April, 2014, 11:58pm

Would you use your parents' life savings to buy a home?

Some young mainlanders take it for granted. Many others are ashamed to do so but still accept the help. If they don't, they will probably never get a chance to own a home as housing inflation has far outpaced pay rises in the past decade.

If they don’t [accept parents’ help], they will probably never get a chance to own a home

Like it or not, many young Chinese, although well-educated and with full-time jobs, are buying their first homes with parental assistance, which usually takes the form of the down payment but sometimes includes the monthly mortgage instalments.

No data is available to gauge the exact proportion of the age group in this category, but the topic is very popular, ranked as the third-hottest in a chat room about housing on a website for mainlanders to discuss various issues.

Someone called "Yao Yang", born in the late 1970s, shared his or her story. Yao wanted to buy a flat in the Oriental Manhattan in Shanghai's downtown Xujiahui district in 2001.

"I found myself not having enough money, and my parents offered to pay the down payment if I could take a mortgage loan," Yao wrote. "I rejected it after serious consideration. As a result, I could no longer afford one afterwards."

Oriental Manhattan is now trading at more than 60,000 yuan (HK$75,400) per square metre in the secondary market.

While Yao did not state his or her income, annual urban disposable income per capita grew 9.1 per cent last year to 43,851 yuan in Shanghai as the city's home prices surged more than 20 per cent.

Yao told the story to persuade fellow young people to borrow from their parents. Without their help, most will not be able to afford a home as prices are at record highs - although the pace of increase has eased in recent months and there is talk about a moderate decline in some cities.

I came across quite a few such families in Beijing. Among my neighbours were retirees who lived with their son and took care of their grandson. The elderly couple had sold their home in Shenyang to help make the down payment.

Developers may welcome such young homebuyers, but the government needs to be concerned, especially when there are growing worries about a widening pension fund deficit as the population ages rapidly.

Mainland pensioners on average receive only several hundred yuan a month from the government, including from their personal pension account into which they contributed during their working years, the Ministry of Human Resources and Social Security said.

The young homebuyers and their devoted parents are betting on a continued rise in home prices to make their investment a sensible one. But what if home prices start to fall? That day will come sooner or later.

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