Millennials’ Share of Growing Mortgage Market Continues to Rise

While Generation X (Gen X) consumers—born between 1965 and 1979—continue to be the primary drivers of mortgage growth in Hong Kong, Millennials—born between 1980 and 1994—experienced a much sharper rise in mortgage originations in TransUnion’s (NYSE: TRU) Q2 2017 Industry Insights Report.

TransUnion found that the share of new mortgages opened by Millennials increased to 32.3% in Q1 2017, up from 26.3% in Q1 2016. New account openings are viewed one quarter in arrears to account for reporting lag. Gen X consumers opened the most mortgages in Q1 2017 with a share of 44.0%, nearly the same as the 44.1% share registered in Q1 2016.

“There are approximately 500,000 mortgages open and active in Hong Kong, and while Gen X consumers maintain the largest overall share, Millennials continue to rise in prominence,” said Brendan le Grange, director of research and consulting for TransUnion Hong Kong. “In four years, Millennials have seen their share of all mortgages opened rise by nearly 70%. Conversely, Baby Boomers have seen their share of mortgage originations decrease by 30% while Gen X has declined 8% in that same timeframe. This is good news for lenders as Millennials are an important growth segment of the population and will drive the consumer credit market in the near future.”

Share of New Mortgages in Hong Kong

This growth in Millennial mortgage borrowers has had positive risk benefits, too. According to TransUnion’s CreditVision score distribution, the credit profile of Millennials opening new mortgages has been the least risky of any generation since 2015. Nearly three in four Millennials (73%) who opened new mortgages in Q1 2017 did so with super prime credit scores, up from 69% in Q1 2016. While older generations have also improved their risk profile year-over-year, only 71% of new mortgage borrowers among the Generation Xers and 69% of Baby Boomers are in the super prime risk band.

Overall, the mortgage market continues to perform exceptionally well. Serious delinquency rates (60 or more days past due) for mortgages declined 5 basis points in the last year to conclude Q2 2017 at 0.05%. At the same time, origination volumes rose 49.5% between Q1 2016 and Q1 2017, to about 26,300 in the most recent quarter.

Credit Card Use Stagnating

TransUnion’s latest Industry Insights Report also found that there are now HK$1 trillion of unused credit card limits in Hong Kong. A typical bankcard consumer had $277,743 in credit limits available to them in Q2 2017, of which they used only $37,984.

“Credit cards remain the most widely held credit product, with four million consumers having access to one. This equates to 96% of credit active Hong Kong consumers—a statistic consistent across all generations,” said Le Grange. “Despite this ubiquity, credit cards continue to struggle for growth in the greater Hong Kong market.”

Credit card origination volumes in the most recent quarter continued their downward trend. After an out-of-pattern year-over-year increase in Q4 2016, Q1 2017 saw new account originations drop by 6.6% compared to Q1 2016. “This trend is likely to persist since the ‘engaged card user’ ¹ behavioural cluster shrank by more than 11% on a year-over-year basis. This is the segment of cardholders most likely to open a new card account in the next 12 months,” added Le Grange.

Inside The Hong Kong Consumer Credit Market – Q2 2017

The Industry Insights Report found that the broader Hong Kong consumer lending environment remained stable in Q2 2017, with low levels of credit risk existing alongside low levels of growth. This, by and large, mirrors the performance of the macro economy, which is showing low unemployment and inflation alongside positive but slow GDP growth and low but rising interest rates.

As of Q2 2017, 4.1 million Hong Kong consumers had access to a revolving credit product. This represents a net addition of nearly seventy-thousand consumers over the last year, a 1.7% increase.

Among the noteworthy changes in Q2 2017 include the growth in personal loan balances, which were up 3.9% year-over-year. This compares to a 1.1% increase in bankcard balances over that same period. If the gap in bankcard and personal loan growth rates persists, personal loan balances will overtake bankcard balances in three to four years. “It’s a trend that we believe may continue in the near term, because we have observed an increase in the ‘engaged loan user’ ² segment, the segment most likely to open new accounts, whereas the similar ‘engaged card user’ segment has declined,” said Le Grange.

For more information about the Q2 2017 TransUnion Hong Kong Industry Insights Report, please visit http://www.transunion.hk/q2-IIR-17

¹ CreditVision Behaviour Clusters ‘Engaged card user’: very high number of card inquiries; 9 % is high risk, please visit here for details

² CreditVision Behaviour Clusters ‘Engaged loan user’: very high loan inquiries; very high loan balance; 42% is high risk, please visit here for details

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