HONG KONG - For asset rich but cash poor pensioners the golden years quickly turn into hardship when their wealth is locked in the roof over their head.
At February’s HKRSA conference on ‘How to enrich retirement’ a number of speakers proposed reversed pensions as a way of alleviating the cash flow burden on retirees. While a few individuals latched on to the idea others in the industry are sceptical, saying the product would not work in Hong Kong.
Reverse mortgages allow home owners over the age of 65 to draw down some of the equity in their home if they need extra money to meet living expenses.
As interesting as the reverse mortgage is, people are also keen to keep assets to give to the next generation so it may be less attractive here, noted David Hatton, CEO of ING Pension Trust.
“In Hong Kong, it is still common for the elderly to live with their children - so maybe the need has not yet risen - but it will as families become more nuclear and there are fewer looking after parents.
“That is why reverse mortgages are likely to be more popular in the West because it is very uncommon for North Americans to have Granny living with the family.
“They expect aged parents to look after themselves, be independent and even move to nursing homes when they are unable to live on their own.”
Steve Butler, managing director, Mercer HR consulting, warned not to read too much into reverse mortgages.
“Personally I don’t think Hong Kong is a great market for it. It’s part of the culture, a) not to have debt and, b) to own your own home. It would take a lot to convince retirees to unravel the assets. With banks sitting on so much debt, would they be so keen to take on more?”
Rex Auyeung, CEO, Principal agreed: “Since the property market in Hong Kong has dropped by more than 50% since 1997, many owners in Hong Kong are suffering from a negative equity problem.
“Due to the uncertain risks of the property market, it will be difficult for banks or even the government to introduce reverse mortgages products under the existing economic conditions.”
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