Chinese Mortgage Boycott Is Causing Major Problems For The Chinese Economy

Chinese Mortgage Crisis

Chinese regulators are pushing smaller banks to lend to qualified real estate projects and meet developers’ financing needs were reasonable in their latest effort to ease concerns triggered by a large-scale mortgage-payment boycott on unfinished houses.

The remarks by the China Banking and Insurance Regulatory Commission (CBIRC) came while home buyers across China threatened to stop making their mortgage payments for unfinished real estate developments.

An estimated 1.5 trillion yuan ($220 billion) of mortgage loans are linked to unfinished Chinese residential projects.

Chinese regulators are attempting to reassure mortgage takers that their homes will be delivered even though they are not directly involved in the projects.

The regulatory backstop came as buyers’ threats to withhold payments for stalled property projects have recently increased on official and social media, a rare show of public discontent.

Several Chinese citizens partaking in the ‘mortgage’ strike are growing frustrated with the lack of progress they see on the ground. Many of the developers of these projects are way over-leveraged and have already spent more than they were financed for.

In a letter to Xinyuan homebuyers in Yingyang, Zhengzhou, the housing regulator said it had agreed to release some funds to developers so the projects could continue.

This comes when the Chinese economy is already on fragile ground. The Chinese central bank was in the process of tightening funding for over-levered interests as the 100 billion dollar behemoth Evergrande was looking like it might fold under its debt.

“Things will get worse,” said Xiaoxi Zhang,an anylsist with Gavekal Dragonomics. “China is determined to curb the leverage held by property developers, and the government will still try to avoid providing more liquidity to them. It will take more time for other measures to take hold,” she said.

For more on this story, please consider these sources:

  1. China Property Crisis Is Spiraling With Homebuyers’ Boycott – Bloomberg
  2. China property crisis enters dangerous next phase – Reuters
  3. Chinese homebuyers refuse to pay mortgages on unfinished apartments – CNN

 

John Nightbridge is a veteran reporter, researcher, and economic policy major from UCLA. Passionate about world issues and potential ways to solve them is a significant focus of his work. Writing freelance and reading the news are John's passions at work. Outside of work, it's all about sky diving, surfing, and stock market modeling.