18 February 2019
With property prices rising faster than their salaries, many young gradates are finding it hard to afford their first home. Photo:
With property prices rising faster than their salaries, many young gradates are finding it hard to afford their first home. Photo:

Helping college graduates buy their first home

A local developer has recently launched a starter-home scheme targeting college students.

The developer will offer a 20 percent discount and an extra low down payment for eligible buyers. It’s reported that local college graduates with two to three years of working experience and a stable income would be eligible for buying these flats.

There will be restrictions in reselling and leasing within the first few years and potential buyers should not have bought any properties before.

Is this a real bargain? Not entirely.

First of all, it’s not unusual for new projects to offer various discounts or incentives that amount to 10 to 20 percent of the transaction value. So the special offer of this starter-home project is not really that special.

Second, the price tag isn’t that attractive given that the project is located in Tuen Mun.

Third, although the lower down payment helps, given the median home price is about HK$5.4 million, paying the monthly installment would still be a stretch for young graduates.

The income of fresh college graduates in Hong Kong has failed to catch up with soaring home prices. It’s estimated that the median income of professionals aged between 20-24 and 25-29 is HK$11,000 and HK$16,000 respectively.

Suppose a young couple takes out a 30-year mortgage on a HK$6 million property, after paying 10 percent as down payment, they need to pay HK$21,300 per month, which could easily represent over 70 percent of their monthly income.

Government officials and the private sector have also come up with various ideas to help young graduates buy their first home.

The central Chinese city of Wuhan is offering 20 percent discounts on house purchases to college graduates in order to lure young talents.

Fintech startup Social Finance, also known as SoFi, which is aiming to list in New York, is offering customized loan products for college students with assistance from big data.

Using data such as the ranking of the college, the student’s course, academic achievements and performance in extracurricular activities, SoFi’s system can decide if one will be a good customer. If yes, a student can get mortgage financing from SoFi even before he or she graduates at rates as low as 3.125 percent for a maximum period of 30 years.

For SoFi, it’s also a good way to be one step ahead of rivals in winning quality customers.

The full article appeared in the Hong Kong Economic Journal on Sept. 27

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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