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Should 'Six Wallets' Be the Solution to First Home Buyers?
Should young people buy a house by using the "six wallets" of savings from parents and grandparents from both sides ?
 NO. 21 MAY 24, 2018

 

Recently, Fan Gang, a member of the Monetary Policy Committee of the People's Bank of China, put forward the "six wallets" concept while answering an audience question during a TV program. On the question of whether a young couple should buy or rent a house, Fan answered that they should buy by using the "six wallets" of savings from parents and grandparents from both sides. Since it is currently impossible for young couples to buy a small flat in a big city like Beijing or Shanghai by totally relying on themselves or even their parents' financial support, Fan argued that it's necessary to add up these "six wallets" to pay for a house.

Given the absurdly high house prices in China, house purchase is always a prickly topic. Fan's remarks have incurred a lot of criticism. Some say he is helping property developers by encouraging the entire family to spend their savings on a house, while some argue that he just expressed his views as an economist on the benefit of buying a house of one's own.

A wise choice

Ke Rui (Guangming Daily): Fan's remarks are allegedly in support of those young people who live off of their parents' accumulated wealth and pensions. Fan spoke about a special situation and his remarks may have been misunderstood. He was asked whether young people should buy or rent a house. He drew his conclusion as an economist from the perspective of cost and yield. Perhaps when suggesting that young people should buy houses, he meant to say that when the whole family is well-off and the six oldest members all have strong social security to rely on, it is a good idea to get financial support from them.

Of course, for most urban families currently, their income and social security are not enough to secure a relatively prosperous life after they spend all their savings on a house. In this sense, naturally, Fan's remarks were quite provoking to most people.

Tao Feng (Beijing Business Today): Currently, the special status of houses in Chinese families is irreplaceable. They are not only a place to live in, but are also a symbol of wealth and social status, which a whole family's life might hinge on.

China's property market does cool down sometimes, but in most cases, house prices stay very high, casting a shadow on young people's lives. Ballooning house prices are not only an economic issue, but also a social issue, shaping individuals' professional choices and personal life. The reality today is that those who own property can benefit from their investment easily, while those who do not continue to slip to the bottom of the social scale and are very anxious about their future. Rocketing house prices are blocking the upwardly-mobile channel and consolidating the gaps between social stratums.

It's imperative to restore the property industry to a normal state by establishing a long-term effective mechanism. The reform will not be easy as it will undoubtedly confront vested interests. However, no matter how difficult the battle is, the fight is worthwhile and should be carried out without delay.

Pan Helin (Time Weekly): To be frank, the "six wallets" idea raised by Fan Gang actually complements the Chinese house purchasing plan. For most young people, they have no choice but to buy houses in this way. Buying a house has always been a significant project for Chinese families, becoming an urgent task for young people once they settle down with a secure job, particularly when they are approaching marriage. They seek high-quality houses in good locations which can bring them good educational and medical resources. However, they need enough money to buy these expensive houses. Obviously, for newly employed young people, they can hardly afford these high prices and even after paying the down payment, the monthly mortgage will be a huge burden.

In fact, young people in China have long been plagued and oppressed by the exorbitant housing market that is growing into a social issue. There is a saying spreading on the Internet: People born in the 1970s are able to buy houses on their own; those born in the 1980s can afford houses with the help of their parents; but those born in the 1990s cannot afford houses even with their parents' support.

Thus, the young that can afford houses with "six wallets" are actually the lucky ones. Most people have only one or two "wallets" or even no "wallet" to bankroll a house purchase.

Living in big cities is attractive to the young because it offers a decent and high-quality life, therefore a great number of young people refuse to leave big cities. For these ambitious young people, a stable and secure life in a small town is not what they want, even without the burden of buying a house. What they really care about is to enrich their life with good opportunities and challenges which can only be found in metropolises. However, given this reality, they should also remember that their parents are not obligated to help them buy houses in these expensive, big cities.

Not an urgent task

Angdaoqianjia (www.jpm.cn): No young or middle-aged people should be held hostage by houses or the idea of the "six wallets." Houses are important, but there are other things and people in our lives that are even more important. Some may argue that we will never be able to afford houses in big cities such as Beijing or Shanghai without using the wealth that has been accumulated for generations in a family. Indeed, house prices are surprisingly high in big cities, which also provide opportunities that small towns can never offer.

It is selfishness, not ambition, for new college graduates to want to buy houses in big cities. By putting forward such demands, they are only trying to satisfy their own desires at the cost of their whole family's happiness. In case of emergency, if a family does not have enough savings, life will be very tough for the whole family.

Spending money from our own pocket on a house purchase will fill us with the satisfaction of achievement and give us confidence to overcome challenges in life. We must believe that our lives will get better and better. Having no house for now does not mean we will never have one. What is really important is our ability. This is the "wallet" that no one can take from us.

Zhang Ping (www.sohu.com): Actually, many people are reacting to the idea of the "six wallets" raised by Fan by taking action. In lower-tier cities where house prices are lower, one may not need all of the "six wallets" to pay for the down payment. However, in big cities, in most cases, even "six wallets" bundled together are not enough to cover the down payment. The heated debate on the "six wallets" argument really reflects the whole society's concern over soaring house prices.

Even if young people can manage to afford the down payment by using money from the "six wallets," the monthly mortgage payment will still be their responsibility , since parents and grandparents have no more to contribute. A rising mortgage rate and the burden of a house will only keep mounting on young people's shoulders. Thus, what they need to do is to increase their own incomes, or they'll find themselves in a dire situation for the rest of their lives as slaves to their houses.

The parents' money and pension are set aside for future medical treatment, not for their children's house purchase. If this part of family wealth is used to buy a house, what will the elderly do in case of serious illness?

If young people do have "six wallets" to support them, then their parents and grandparents must have their own property. Thus, when their parents pass away, young people will be left with several houses. As a result of the one-child policy, the generation born in the 1990s is very small, so in the future, the supply of houses will exceed demand.

Besides, young people don't need to buy houses, as they can live in rented houses. Young couples are eager to buy houses because they fear they may never be able to afford a house in the future due to soaring prices. China's real estate sector is expanding frantically at the present moment. But if house prices drop sharply in the future, it will not be necessary for the young to use up the "six wallets" of savings for the down payment of a flat.

With declining birth rates, young families in big cities will have several flats in the future. It is better to live in a rented house and focus on success in one's career, waiting for house prices to drop to a normal level. The "six wallets" argument is nudging the young to sacrifice several generations' wealth to shore up the real estate boom.

Copyedited by Rebeca Toledo

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