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Analysis of the Chinese reverse mortgage market: possibilities and risks

Aging is an inevitable trend for most of the countries. Compared to developed countries, China lacks a comprehensive social security system that provides a safety net for the welfare of the elderly in their retirement. Even more, Chinese seniors are about to suffer insufficient support from traditional means ??? family and government support. As a last resort, reverse mortgages are a good financial tool to unlock home equity and improve the living standard for elderly without them moving out. This thesis aims to assess the Chinese reverse mortgage market from different perspectives to determine whether reverse mortgages will work in Chinese market. From the demand side, the analysis shows that China???s aged population, identified as the potential consumers of reverse mortgages, has a large fraction of wealth tied up in the form of housing and is in need of a method to release their home equity to finance life after retirement. From the supply side, potential providers could also benefit from reverse mortgages despite the exposure to various risks, e.g. cross over risks. Further examination of the Chinese financial and housing markets, and mortality rate helps to build the Chinese context based on which cash flows of reverse mortgage transactions are simulated. Simulation results show that reverse mortgages are beneficial to the Chinese elderly as accessing home equity allows them to double their consumption. Based on this analysis from different angles, we conclude that reverse mortgages will work in the Chinese market.
Date January 2009
CreatorsFeng, Jun , Actuarial Studies, Australian School of Business, UNSW
PublisherAwarded by:University of New South Wales. Actuarial Studies
Source SetsAustraliasian Digital Theses Program
Detected LanguageEnglish
RightsCopyright Feng Jun .,

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