Is There a Demand for Reverse Mortgages in China? Evidence from Two Online Surveys

36 Pages Posted: 17 Jan 2019

See all articles by Katja Hanewald

Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR)

Hazel Bateman

UNSW Sydney, CEPAR

Hanming Fang

ShanghaiTech University - School of Entrepreneurship and Management

Shang Wu

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 17, 2019

Abstract

Reverse mortgages provide an alternative source of retirement funding by allowing older homeowners to borrow against their home. However, a recent pilot program of reserve mortgage products in several large Chinese cities saw almost no take up. To ascertain the demand for reverse mortgages in China, we conduct and analyze two online surveys that focus respectively on homeowners aged 45-65 as potential purchasers, and on adult children in the 20-49 age group representing children of potential purchasers. We address the reported shortcomings of the pilot reverse mortgage product by testing an improved product design presented in a clear and comprehensive format. In stark contrast, we find that 89% of older Chinese homeowners would be interested in this new reverse mortgage product, and 84% of adult children would recommend such a product to their parents. Participants in both surveys reported that they would use the reverse mortgage payments to fund a more comfortable retirement and to pay for better medical treatments and aged care services. Respondents’ interest in reverse mortgages was associated with their familiarity and understanding of the product, and its perceived potential to address liquidity constraints in retirement. Health status, aged care preferences and proxies for intergenerational links were also important. Our results are contrary to the common perception of intergenerational expectations of wealth transfer in China, and provide new evidence in support of the potential development of China’s reverse mortgage market.

Keywords: Reverse mortgage demand, Retirement income, Housing, China

JEL Classification: D14, G11, G21

Suggested Citation

Hanewald, Katja and Bateman, Hazel and Fang, Hanming and Wu, Shang, Is There a Demand for Reverse Mortgages in China? Evidence from Two Online Surveys (January 17, 2019). ShanghaiTech SEM Working Paper No. 2019-002. Available at SSRN: https://ssrn.com/abstract=3317321 or http://dx.doi.org/10.2139/ssrn.3317321

Katja Hanewald (Contact Author)

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

School of Risk & Actuarial Studies
UNSW Sydney
Sydney, New South Wales NSW 2052
Australia

Hazel Bateman

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Hanming Fang

ShanghaiTech University - School of Entrepreneurship and Management ( email )

100 Haike Rd
Pudong Xinqu, Shanghai
China

Shang Wu

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

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