Chinese buyers withdraw mortgage payments in protest against construction blockade — Radio Free Asia
Homebuyers across China are threatening to launch a mortgage payment strike to protest the blocking of construction of off-plan properties by major developers across the country.
Investors began selling Chinese banking and property stocks on Thursday, as well as corporate bonds issued by property developers, on fears the strike could hit the financial system, Reuters reported.
A growing number of home buyers across China say they will suspend mortgage payments to banks until developers resume construction of pre-sold homes, local media and social media reported.
Japan’s Nomura estimated that developers only delivered about 60% of homes sold off-plan between 2013 and 2020. Outstanding mortgages in China grew by 26.3 trillion yuan during this period.
“We own a property in Wuhan Optics Valley,” one buyer wrote on social media. “My husband and I both graduated from Tsinghua University with master’s degrees. Now working in Shenzhen, we originally planned to move back to Wuhan to settle down, but last August I heard the news that the construction site of construction was on hold, so I’m very anxious now.”
On July 12, buyers at 35 residential projects in 22 cities across China said they had decided to halt mortgage repayments, according to a Citigroup Inc. report on Wednesday, despite the fact that it could hurt their credit ratings. personal.
Citigroup said the move could lead to bad debts of up to $83 billion, with large state-owned banks such as China Construction Bank and the Industrial and Commercial Bank of China facing greater risks as a result.
A document titled “Summary of Loan Suspension Notices of Unfinished Buildings in Various Provinces and Cities Nationwide” indicates that apartment buyers in more than 110 unfinished buildings in 21 provinces have decided to halt mortgage repayments effective of July 13.
The buyers were linked to 32 unfinished projects in Henan, 15 in Hunan and Hubei, eight in Jiangxi and seven in Shaanxi, he said, adding that well-known real estate companies like Shimao, Greenland, Aoyuan and Xinyuan were among those affected by the action.
A former finance worker named Song said the outcome was entirely predictable.
“The Chinese real estate market is a black hole, which is the result of collusion between real estate company owners and local governments,” Song said.
“The off-plan sale of properties is illegal, but they don’t enforce the law; the [local] the leaders have the last word.”
Real estate in China has long been in crisis, with the country’s top 100 property developers selling 43% fewer new homes in June 2022 than during the same period last year, according to China Real Estate Information Corp.
Song said mortgage income is currently supporting several major Chinese banks.
“Several major banks in China are backed by housing loans,” Song said. “Mortgage loans in China have now reached 50 trillion yuan, equivalent to one-fifth or one-sixth of the money in circulation.”
Wang Longde, a former lawyer who lives in Laos, says the blame for the mortgage strike lies with the ruling Chinese Communist Party (CCP).
“With a [government-issued] license, legally speaking, the property can be sold [off-plan]. But the government is not supervising developers to ensure that they deliver the … real estate to consumers on time and as needed,” Wang said.
Risk transferred to consumers
According to Wang, many developers only build the main body of the building, which accounts for 70 to 80 percent of construction costs.
If they run out of funds, then they will simply stop production, transferring the risk to consumers.
Many homebuyers don’t require a contract that spells out what happens to a mortgage if construction is delayed or not completed, he said.
The song accepted.
“All problems in the banking system are caused by local authorities,” he said. “For example, Shanghai Bank of Communications or China Construction Bank, their presidents are mostly silent. The real [power] is owned by the local government. »
“It’s about central-level officials.”
Citibank analyst Griffin Chan warned that the mortgage strike is “a critical moment for social stability”, as government censors scramble to suppress posts about the strike.
Posts on the subject available earlier on Thursday disappeared from social media later in the day, RFA found.
“Judging from the current economic situation in China…if people refuse to repay [companies] go bankrupt,” Song said.
“All aspects of banking and credit reporting will be affected, but ordinary people don’t care and fold because they have lost faith in society as a whole,” he said.
Many homebuyers have said in social media posts that they have turned to a mortgage strike as a last resort and only plan to hold repayments until their properties are completed by developers.
Translated and edited by Luisetta Mudie.