Home ownership means stability and settling down in a place permanently. It’s something that’s deeply ingrained in the mind of a typical Hongkonger. One must be able to put a roof over his head; otherwise, he’s considered a loser.
But buying a home also means saying goodbye to many things: your savings, freedom of mobility and even personal autonomy.
Still, admit it or not, saving for the down payment and spending the next 30 years paying off the mortgage is the common endeavor of most Hongkongers.
A few, simple calculations will give you an idea of the cost of home ownership.
The average net price of a home is HK$10,627 per square foot as of June, according to realty brokerage firm Midland.
This translates into HK$113,390 per square meter, which means a 450 square foot flat costs well over HK$5 million.
So for most, the only feasible option within reach is a flat in New Territories, where the lowest possible entry-level home is HK$3 million.
- Home price: HK$3,000,000
- Average bank interest rate: 2.1 percent
- Loan-to-value ratio: 90 percent (Hong Kong Mortgage Corp. Ltd. announced in February that the maximum mortgage insurance program cover has been reduced from 90 percent LTV ratio to 80 percent, except for first-time buyers with regular salary and stronger repayment ability, but still, properties with a value lower than HK$4 million are eligible for the maximum cover of 90 percent)
- Combined average monthly income of a couple: HK$30,000
- Contribution period: 30 years
- Overall payment at purchase (including down payment, stamp duty, commission, legal and insurance fees): HK$380,000
- Monthly mortgage payment: HK$10,555.3
The amount is based on a number of favorable conditions like the cheapest possible unit, highest LTV cover and longest contribution period. Other expenses like home renovation are not included.
So, HK$380,000 is the price of the ticket to home ownership and 30 years of “fixed-term imprisonment” to pay the money back.
Now, if you save HK$3,000 per month, according to a home-buying tip from Commission on Youth Chairman Lau Ming-wai, whose dad Joseph Lau Luen-hung is striking gold by selling some of the most expensive homes in town, you will need more than 10 years to accumulate the amount —unless, of course, you are lucky enough to have a rich dad.
If you save up a bigger portion of your salary, let’s say HK$6,300, you will still need five years.
If you start today to work your way to your dream home in the city (by which we mean a 350 square foot shoebox), you will need 35-40 years – almost a third to half of your life – to get there.
You probably won’t take the risk of starting your own business or even changing your employer as you don’t want to stop making your monthly contributions. Otherwise, the bank can kick you out of your home and repossess the property.
So a dream home can also become a virtual prison, and your jail term is decades long.
One the other hand, a mainlander in the same station in life may feel a lot luckier.
It’s true home prices in Beijing, Shanghai, Guangzhou, Shenzhen and a number of wealthy second-tier cities have also ballooned over the years.
Yet many young migrant wage-earners in these urban centers can still choose to go back to their hometown where a home is substantially cheaper.
The same choice applies to these cities’ indigenous grassroots residents; they can opt to buy units in smaller neighboring cities or counties and use the savings to buy a car.
Hong Kong youngsters do not have such alternative as many resist living in the mainland.
Besides, settling down across the border is deemed a non-solution, except for those who cannot make a decent living in the territory after retirement.
But the task of saving for the down payment and monthly mortgage payments may not appear to be that formidable to their mainland peers.
This is all because of Beijing’s birth control policy. Mainland parents are virtually duty-bound to contribute their life savings to their only child for the purpose of home purchase, while Hong Kong parents will have a hard time allocating financial assistance among their kids.
Also, it is not rare that when their kids reach marriageable age, these parents may still be servicing their own mortgages.
Mainland parents, by comparison, generally live in government-built homes — China’s private housing market only began in the early 1980s — or have bought their own flats decades before the home market frenzy. Thus, they are in a better position to help their only child.
Now, is there a way out for Hong Kong youth?
They can either abandon their feeling of superiority and move to the mainland — that is, if they think that freedom and justice can be sacrificed for the sake of owning a home.
Or they can abandon the pursuit of their own home, and find a prospective wife and in-laws who think the same way.
Otherwise, start saving money.
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