Local government in Beijing, China, is planning to experiment with reverse mortgages as a way for people to finance nursing home care, although “unpredictable real estate policies” will make it difficult to popularize this model, say industry insiders in a Beijing Global Times article.
Insurance companies, commercial banks and public housing management departments will be encouraged to start trials of reverse mortgages as part of the 12th Five-year Plan, which goes from 2011-2015, according to a recently-published notice on the Beijing Municipal Bureau of Civil Affairs website, Global Times reports.
Reverse mortgages are catching on in other parts of the world after they grew in popularity in the United States in the past few years, and now China believes they might be a way for elderly people to be able to pay for care and nursing homes in their old age.
“Pushing forward a new financing model for the rest home industry is a good idea, especially with an aging population,” Zhu Fengbo, president of rest home development company Beijing Sun Cities Group, told Global Times. “But it will take a long time for the new model to work, due to the government’s changeable and unpredictable real estate policies, which are confusing for developers, ordinary people and financial institutions.”
Another factor is potentially fluctuating property values, which makes it hard to estimate the value of seniors’ properties.
“It will be difficult to promote the new model in big cities, let alone small ones,” Liu Kailong, general manager with Anhui Tiankang Property Ltd, which manages a rest home project in Chuzhou city, East China’s Anhui Province, told Global Times.
Most people are also determined to leave their homes to their children after they die, Liu continued.
However, fees for rest homes are considered high to many low-income seniors, especially those living in smaller cities, and Liu’s rest home project is losing money because of high developing and construction costs.
Similar to the United States, China’s population is aging rapidly. The 60+ demographic, currently at 12.5% of the overall population, is expected to jump to 20% in 2020, and still higher to 31% in 2050, according to the China National Committee on Aging.
Read the Beijing Global Times article here.
Written by Alyssa Gerace