Liang Hongfu

'Mortgage slaves' should quit moaning about plight

By Hong Liang (China Daily)
Updated: 2006-07-11 06:21

Coming from Hong Kong, I find it rather difficult to sympathize with the moaning and groaning of the mainland's "mortgage slaves."

According to this definition, a big portion of the Hong Kong population has willingly enslaved itself by placing the mortgage yoke around their necks. As the economy continues to improve, many more young people are eagerly enlisting for a life of servitude to the banks.

But this is not the way people, especially the younger generation, look at property ownership and mortgages in Hong Kong. Their common attitude is rather more positive and self-reliant.

The average unit price of properties in Hong Kong is much higher than in many mainland cities, including Beijing, Shanghai and Guangzhou. But the difference between the average incomes of younger workers in their 20s and 30s in Hong Kong and major mainland cities is not all that big. For that reason, the debt burden on an average young family in Hong Kong is the same, if not heavier, as that suffered by their counterparts in Shanghai.

But unlike their mainland counterparts, young home-buyers in Hong Kong do not see themselves as "mortgage slaves." This term is pretty much unheard of in Hong Kong, although people there have been living with high property prices and unyielding mortgage debt for many more years than those on the mainland. For many Hong Kong people, buying an apartment is an investment in the future, while making mortgage repayments is a way of saving for old age.

It is not uncommon in Hong Kong for a first time home-buyer, usually a newly wed couple, to devote half of their combined monthly income to mortgage repayments. Despite the strain on their family finances, many young home-buyers are taking it in their stride because they are confident that property prices will rise and, more importantly, their incomes may increase.

Rising property prices are usually a reflection of a booming economy, which will invariably drive up average wages. As the combined income of a family increases, the portion for mortgage repayments, which is pretty much fixed, will decrease. As long as the price of their property continues to increase, many Hong Kong homeowners see mortgage repayments as a form of savings. When the mortgage is paid off, they expect to have full ownership of an asset whose market value is greater than the total sum of the loan plus interest.

Of course, there are unexpected circumstances which can seriously undermine such confidence. But even the collapse of the property market following the outbreak of the Asian financial crisis in 1997 did not drive any significant number of mortgage borrowers to default.

Their perseverance in the most trying times has apparently paid off. The Hong Kong economy has embarked on a sustained recovery since 2004, helping to push up property prices and wages. As a relatively more mature economy, annual growth is expected to remain modest at an average of about 5 per cent. Property prices are also expected to increase in line with economic growth, and that's enough to entice many more new buyers.

People with genuine cause for grievance are those who, for whatever reasons, have been left out of the economic good times. They cannot afford the 30 per cent down payment for an apartment and therefore do not qualify for mortgage financing. They are the people who need government help and subsidies, not the "mortgage slaves" whose major complaint is the loss of their yuppie lifestyle.

A commentary in a Hong Kong newspaper quoted a young Shanghai couple, reported to be earning three times the average salary, as saying that they cannot afford to have babies because half of their combined income is going to repaying the mortgage loan for their new 100-square-metre apartment.

The question to ask is why do they need such a large apartment, which is twice the area of average apartment for a family of four in Hong Kong. What's more, the remaining half of their combined salary is only slightly below the income of an average family in Shanghai.

Like this couple in Shanghai, many so-called "mortgage slaves" are the favoured children of the mainland's economic miracle that has been built, at least in part, on the hard work and sacrifice of the millions of migrant workers, who have to put up with low wages, poor living conditions and, sometimes, discrimination against them and their children in order to work in the big cities.

Instead of nursing their self-pity, these "mortgage slaves" should, perhaps, spare some thoughts for those who are much less fortunate than they are and do something to help their poor and displaced fellow citizens.

Email: jamesleung@chinadaily.com.cn

(China Daily 07/11/2006 page4)