Mortgage applicants, born post-1995, increase by 210 per cent in three years

Generation Z cannot afford sky rocket home prices; letting parents invest in their names

According to a shocking revelation by TransUnion (NYSE: TRU) regarding home loan applicants in Hong Kong across all age groups, the post-1995 was increased by 208 per cent to 2,042 from 662, in the last three years. The group born from 1980-1994 was also enlarged by 62 per cent from 37,791 recorded three years ago, to 61,205 by mid of this year. Whilst, the number of applicants born from 1965 to 1979, 1946 to 1964 and in 1945 or before also rose 27 per cent, 7 per cent and 11 per cent respectively.

TransUnion reveals that the eldest applicant in the post-1995 group is now 23 years old. Despite the fact that property prices continue to stay unattainably high, it is hard to believe that applicants in this generation were able to afford high-priced homes with their relatively low incomes. Applicants in this age group, purchasing homes to start new families, were not many. It can thus be inferred that the home buyers in the post-1995 group are likely dependent on their family for financial support. In another circumstance, their parents might invest in new properties in their children’s names in order to benefit from the first-time home buying policy.

First-time home buyers might seek parental support by refinancing the existing property mortgage

It is the time for the young generation born from 1980 to 1994, currently aged between 24 and 38, to consider buying a home. For the past few years, home prices have elevated to unreachably high levels. The Renting and Evaluating Department in Hong Kong reveals that the Private Domestic Average Price Indices for all classes of properties went up by 28 per cent to 382.6 this year from 298.8 in 2015, reaching a historical high since 1997. This not only increases the repayment burden, the first mortgage instalments also boost, causing enormous pressure on the home buyers.

As reported by the Census and Statistics Department in Hong Kong, the median monthly wage of employees in Hong Kong, excluding government employees, student interns, work experience students and live-in domestic workers as exempted by the Minimum Wage Ordinance, was $16,800 in mid of 2017, only 8.4 per cent higher than that of $15,500 in 2015. Based on this, it is hard to believe that the number of 1980-1994 born buyers, who could afford homes, surged by 62 per cent in three years. It is therefore presumed that some successful first-time home buyers might depend on their parents’ banks to finance their first instalments.

en they do not have sufficient capitals available. Some property developers provided new payment terms that buyers could borrow up to 120 per cent of the loan payment if their parents are property guarantors.

Rate hikes and economic reversal might result in high financial pressure

Extending the home loan repayment period and increasing the mortgage amount might pressurise parents whose post-1995 children pay the first instalments of their home purchase, substantially or partially, by refinancing their existing properties. Home loan repayment is not a critical issue in Hong Kong as long as the current unemployment rate and loan interest rates remain low. These conditions enable buyers to have stable incomes to repay their loans. In light of the widened interest rate difference between the US and Hong Kong, banks in Hong Kong have adjusted their mortgage rates to higher levels gradually. The hike in interest rates and possible economic reversal might affect families refinancing their home loans. TransUnion advises first-time home buyers to be realistic about their affordability and avoid unnecessary financial risks from over-borrowing.

Information Security at TransUnion