Chinese Homebuyers Halt Mortgage Payments

According to statistics from industry associations, Chinese homebuyers in dozens of cities have stopped making mortgage payments for unfinished projects, escalating concerns about a financial contagion in the nation’s struggling real estate market. Large companies like Evergrande and Sunac have struggled to make payments and renegotiate with creditors since authorities began cracking down on excessive debt in the real estate sector in 2020, putting them on the verge of bankruptcy.

In the most recent setback, an increasing number of homebuyers have threatened to stop making mortgage payments if builders do not start working on the homes they have already sold. Data from research firm China Real Estate Information Corporation shows that as of Wednesday, buyers have stopped making payments for apartments in at least 100 residential property developments across 50 cities (CRIC). 58 projects were announced on Tuesday, up from 28 on Monday, according to a report by experts at the banking firm Jefferies. In the previous three days, they claimed, “the names on the list doubled every day.”

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The research added that the incident will lower buyer mood and hamper on a rebound in sales. These include projects that have encountered severe delays and others that have not yet reached their delivery date. In order to handle the mortgage strikes, the housing ministry conducted urgent talks this week with financial regulators and significant Chinese banks, according to a story published on Thursday by Bloomberg News, which cited sources familiar with the situation.

Concerned that other buyers would join the bandwagon, the regulators asked that local governments and banks notify them of any relevant changes in their areas. According to Jefferies, the amount of non-performing loans would rise by 388 billion yuan ($58 billion) if every homebuyer defaulted. The buyers’ moves followed delayed pre-sold home deliveries, ambiguous delivery dates, and stalled construction, according to a research released on Thursday by Nomura analysts.

In China, pre-sales are the most popular method of home sales, thus the stakes are very high, it stated. “We are particularly concerned about the financial impact of the homebuyers”stop mortgage repayments’ movement, since China’s real estate collapse may finally negatively affect onshore financial institutions,” the statement reads. A third term for President Xi Jinping is anticipated at the Communist Party’s 20th Congress this fall, which will take place during a period of declining Chinese GDP and sluggish real estate sales.

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