It’s fairly well-known that young home buyers in Hong Kong are forced to “raise funds” from their parents, at least for the down-payment, if they are to have any chance of owning a home in the city. Now it’s surprising to see the same trend in America.
Statistics from the US National Association of Realtors reveal that up to a third of first-time home buyers in that country rely on the “Bank of Mom and Dad”.
Some borrow money from their parents on more liberal terms than that offered by commercial lenders, and some simply don’t have to repay the money at all. The situation is especially typical in San Francisco where transactions of half of the entry-level homes there are financed this way.
The key difference with Hong Kong is the tax issue. In the US, tax lawyers will typically design the best possible arrangement to help presents give or lend money to their children while minimizing the tax outlays.
Meanwhile, with wage growth constantly lagging the rise in property prices, many youth are opting to live with their parents.
A National Housing Survey has found that in 2006, twenty-seven percent of young US adults aged between 18 and 34 were living with their parents. But by 2013, the ratio had climbed to 31 percent.
This is despite the fact that American lads, from a very young age, are imbued with a mindset that they need to move out and lead their own independent lives.
Living with parents, something to be ashamed of, is but a last option.
But now the ideals are forced into a backburner given the harsh realities of the modern era.
This article appeared in the Hong Kong Economic Journal on April 15.
Translation by Frank Chen
[Chinese version 中文版]
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