China’s banking regulator has urged the country’s banks to lend more to distressed property developers as a mortgage repayment boycott spreads among apartment buyers angry that the homes they bought off-plan are yet to be built.
The boycott is affecting around 100 residential schemes in 18 provinces so far, according to China’s Global Times newspaper, while Reuters reports that around 200 schemes and 80 developers are affected.
Mortgage protests will further restrict cash flowing to debt-burdened developers who have delayed or halted projects owing to a slump in sales attributed to China’s response to Covid-19, its effects on the economy and restrictive central government policies in recent years intended to deflate China’s property bubble.
So dire is the situation that some developers have promised to accept stocks of garlic, watermelons, wheat and barley as down payments from farmers on new apartments, the Financial Times reports.
Real estate investment volumes in China stood at 6.83 trillion yuan (just over US$1 trillion) in the first half of the year, which is down 5.4% year-on-year, reports Global Times, citing the National Bureau of Statistics.
Some 900 billion yuan ($134bn) worth of mortgages were bound up in stalled projects across China in the first half of this year, said Reuters, citing the E-house China Research and Development Institution. That is around 1.7% of total outstanding mortgage loans.
The regulator, China Banking and Insurance Regulatory Commission (CBIRC), yesterday told the official newspaper, China Banking and Insurance News, that banks should “shoulder social responsibility” and engage with plans to fill the funding gap and support the acquisition of real estate projects, said Reuters.
“I think the Chinese government has the will and means to solve the problem, and will likely take swift actions,” Mark Dong, Hong Kong-based co-founder and general manager of Minority Asset Management, told the news agency.
Dong said he expected state-owned developers would step in and acquire troubled projects from heavily-indebted private companies, hastening consolidation in China’s property sector.