Hong Kong consumers struggle with bills and loans despite rising incomes, TransUnion says

South China Morning Post10-09 17:30

An increasing number of consumers in Hong Kong are finding it difficult to cover their monthly obligations even as their incomes continue to rise, according to a study. A quarter of Hongkongers said ...

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Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.\nTransUnion's third-quarter consumer pulse report surveyed 860 adults aged 18 and above, between July 16 and 29.\n\"Although the Hong Kong Monetary Authority [HKMA] has recently reduced the city's base rate following the decision of the US Federal Reserve, consumers will need to remain resilient and patient until potential further cuts to make the cost of credit more manageable, particularly for borrowers who are struggling,\" the report said.\nWhile the HKMA reduced rates by 50 basis points, top lenders including HSBC cut their prime lending rates by only 25 basis points. The cuts translate to savings for borrowers who tie their loans to prime rates. For a typical HK$5 million (US$640,000) loan of 30 years, a quarter-point cut in prime rates will save mortgage borrowers HK$720 per month.\n\nThere is growing anxiety about financial stability among Hong Kong consumers, according to a new study. Photo: Shutterstock alt=There is growing anxiety about financial stability among Hong Kong consumers, according to a new study. Photo: Shutterstock>\nOn the other hand, 35 per cent of consumers reported improved household income in the third quarter, an increase from 28 per cent a year earlier. They also anticipate income growth in the coming year compared with a year earlier.\nFinancial optimism, however, was most pronounced among Gen Z consumers, with more than half indicating an increase in income, compared with 45 per cent in the third quarter last year.\nLooking ahead, Hongkongers remain confident about their future earnings, with 42 per cent expecting their income to increase over the next 12 months, up 7 percentage points from a year earlier.\n\"While there is a notable increase in income and confidence especially among the younger generation, we also see rising concerns about financial stability,\" said Weihan Sun, principal of research and consulting for Asia-Pacific at TransUnion.\nBut consumers are taking proactive steps, such as prioritising savings and adjusting their spending habits, to show their commitment to financial resilience in the face of potential uncertainties, he added.\nStill, some Hong Kong consumers were worried about their financial outlooks. Their biggest concern for the next six months was the impact of inflation on daily-use goods, followed by recession and job uncertainty.\nAmid such concerns, 39 per cent said they have increased their emergency fund savings, while 23 per cent have grown their retirement nest egg in the past three months. A similar percentage of consumers resorted to other cuts in discretionary spending such as dining out, travel and entertainment.\nSuch cautious sentiment was reflected in a 10 per cent decline in business for Hong Kong restaurants during this year's Mid-Autumn Festival, the report said.\nMeanwhile, the growing optimism among Gen Z has created an appetite for credit, with nearly half of them saying they will apply for new credit or refinance existing borrowing in the next year.\nFollowing the HKMA's rate cut in September, a further uptick in credit activities is expected, as such cuts historically lead to increased borrowing, according to TransUnion.\nDemand for new mortgages increased significantly in the third quarter, which could be a positive sign for the property market. Among consumers who plan to apply for new credit, 20 per cent said they plan to apply for a new mortgage, up from 14 per cent a year earlier.\n\"The positive outlook on household income, along with cautious consumer sentiment and an anticipated lower interest rate environment, creates a promising landscape for growth in Hong Kong's credit market,\" said Sun.\nThe increasing demand for new credit products, particularly among Gen Z consumers, presents exciting business opportunities for financial institutions, he added.\nThis article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved. \nCopyright (c) 2024. South China Morning Post Publishers Ltd. 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