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

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Listed:
  • Katja Hanewald
  • Hazel Bateman
  • Hanming Fang
  • Shang Wu

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.

Suggested Citation

  • Katja Hanewald & Hazel Bateman & Hanming Fang & Shang Wu, 2019. "Is There a Demand for Reverse Mortgages in China? Evidence from Two Online Surveys," NBER Working Papers 25491, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25491
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    References listed on IDEAS

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    Cited by:

    1. Hanewald, Katja & Jia, Ruo & Liu, Zining, 2021. "Why is inequality higher among the old? Evidence from China," China Economic Review, Elsevier, vol. 66(C).
    2. Eva Boj del Val & M. Mercè Claramunt Bielsa & Xavier Varea Soler, 2020. "Role of Private Long-Term Care Insurance in Financial Sustainability for an Aging Society," Sustainability, MDPI, Open Access Journal, vol. 12(21), pages 1-21, October.
    3. R. & Junsen Zhang, 2019. "Housing Prices, Inter-generational Co-residence, and “Excess” Savings by the Young: Evidence using Chinese Data," Working Papers 2019-059, Human Capital and Economic Opportunity Working Group.
    4. Wei Han & Ping Wang & Hongjie Dong, 2020. "Influence of Egoistic and Altruistic Bequest Motives on the Willingness to Participate in Reverse Mortgages in China," Asian Economic Journal, East Asian Economic Association, vol. 34(4), pages 430-463, December.
    5. Mark Rosenzweig & Junsen Zhang, 2019. "Housing Prices, Inter-generational Co-residence, and “Excess” Savings by the Young: Evidence using Chinese Data," NBER Working Papers 26209, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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