Housing Demand: Can't Take Marriages at Face Value

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

January 2008

Your humble author recently came across a news report quoting a real estate researcher who said with N number of marriages a year in Hong Kong, even 1/2 N would mean a lot of (buying) demand for new residential properties. While there could be some relevance in the opinion, there is an inherent flaw to gauge demand derived from marriages because:

A) Marriages generally decrease the demand for residential real estate in terms of number of units required = assume person A has a home and person B also has a home and they fall in love and marry. One unit is not required for accommodation anymore and thus it could either be rented out or sold. [Note: we do not bother with the floor area of the home and it is likely that they would need to get rid their respective homes and get a bigger one, yet the number of residence remains at 1, not 2 as previously when they were single]

B) Divorces generally increase the demand for residential real estate in terms of number of units required = this is the reverse of the above i.e. when person A and person B split up, one of them would require a new home, be this rented or bought. [Note: again we do not bother with the floor area and it is likely the divorcees may need to get rid their bigger home in return for 2 smaller ones]

IF that is the case, then why do people in Hong Kong generally associate marriages to increased (buying) demand in residential properties? There are a couple of reasons:

1)     Common for single adults to stay with parents = While in many developed economies, especially western countries, adults, both men and women, tend to live away from their parents even if they stay in the same city as their parents, it is not uncommon for single adults in Hong Kong to stay with parents and only move out when and if they are to marry. In this context, there is some truth that marriages do produce more housing demand.

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2)     Cultural linkage between marrying and buying a new home = for some reasons unknown to your humble author, many people in Hong Kong have throughout the past 30 years or so come to obsessively associate marriage with home-buying. At times, couples refrain from marrying simply because they could not afford a home yet, or as portrayed in some local TV soap operas, the would-be-mother-in-law generally favors a home-owning would-be-son-in-law.

However, these tendencies do not in themselves justify seeing marriages as being readily a huge supporter-factor for increased (home-buying) housing demand. Here are a few reasons:

a)     Fake marriages = it is an open secret that a portion of marriages in Hong Kong are, should we say, not of the love and affection type. It would be a surprise to see such couples becoming a housing demand statistics.

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b)     Marriages between 2 home owners = as stated in (A) above, such marriages tend to decrease overall housing demand. They may still need to buy a new home together and sell their old ones, which collectively mean great business (demand) for real estate agents (agency service), yet do not confuse demand for real estate service with demand for real estate.

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c)     Marriages between 1 home owner and 1 non-home-owner = similar to (b) above, and while the couple may still need to seek a new home, the overall demand for real estate remains at 1 i.e. no change here in this case.

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d)     Marriages between 2 non-home-owners = assuming they want or need to buy their own home AND that they are living with their respective parents prior to marriage, yes this would mean 1 new demand for housing.

By NO means are the above exhaustive, and to complicate the picture further, some couples may decide to remain renters, change from owners to renters, stay in their public-assisted-rental homes, and so on and so forth. Technically though, in terms of demand for housing units, there is little or no difference between a buyer and a renter.

Nonetheless, when people in Hong Kong think about marriages and housing demand, most are thinking of the buyer-type demand only. Certainly most if not all of the time, and save for the very luxury residential apartment complexes, the residential real estate developers are also eyeing this buyer-type group only.

The bottom line is that one needs to dwell a bit deeper into the marriage statistics and gauge-guess-verify the proportions, if feasible, of the various categories of marrying couples based on their home-owning-status etc BEFORE a meaningful estimate of demand from marriages could be performed. Else, it sounds more like a marketing hype.

Perhaps the media, researchers, realtors and real estate developers should also take note of the divorce statistics, which may prove no less intriguing.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.                                

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