China censors landlords who threaten to stop paying mortgages

(Photo Illustration by The Real Deal with Getty Images)

Chinese authorities are censoring social media posts in response to growing protests from homebuyers threatening to stop repaying home loans on unfinished projects.

Frustrated buyers gathered in Wuhan last week outside the office of a banking regulator, saying they would not make payments for more than 300 unfinished properties across the country, The Wall Street Journal reported. Projects include some from developers such as China Evergrande, whose chairman was just expelled, and Kaisa Group.

Censors erased references to mortgage boycotts and online petitions, even as the China Banking and Insurance Regulatory Commission has asked banks to provide credit to developers who need more funding to carry out their projects. Analysts have estimated the total amount of subprime mortgages in the country to be between $150 billion and $370 billion.

“Threats of mortgage payment halts are truly worrying,” said Owen Gallimore, head of credit analysis for Deutsche Bank’s Asia-Pacific Flows Trading Desk. “But it’s unlikely to cause major stress on China’s banking system.”

Unfinished projects represent a small part of China’s mortgage market and are mostly limited to struggling developers, more than 30 of whom have defaulted because they cannot sell new offshore debt.

China doesn’t have a lot of mortgage defaults. Banks often require large down payments and their bad debt rate on mortgages was less than 0.5% in 2021.

At the same time, many Chinese developers are selling apartments before developments are fully built, often using cash from pre-sales to further fund projects.

Housing officials in Xi’an, Shaanxi province, said they would start monitoring the use of blocked funds by developers. In Tianjin, authorities are asking developers how much money they should borrow to speed up construction of delayed projects. Evergrande chairman Xia Haijun has been ordered to step down, along with chief financial officer Pan Darong, amid an investigation into whether some of his deposits were used as collateral for others to borrow from banks then failed to repay the loans, according to Bloomberg.

—Victoria Pruitt

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