Mortage boycotts add more trouble to a Chinese property market that was already in turmoil
Save time by listening to our audio articles as you multitaskThis has been a common phenomenon for years. But for the first time ever people across China are halting mortgage payments on such homes in protest. Buyers have stopped payments on at least 319 projects in 93 cities, according to documents that have been collected by volunteers and published online.
Pre-payments are one of the most important sources of liquidity for homebuilders. About 90% of new properties in China were pre-sold in 2021, up from just 58% in 2005. The funds are virtually interest-free and are used to pay for construction. But they have also been poorly regulated and often misused. Many homebuyers fear the money they have put up for flats has been squandered and will be irrecoverable.
A bigger concern is that the boycotts deliver yet another blow to sentiment, and could further sap liquidity from the sector. Housing sales were already down by about 35%, year on year, in the first five months of 2022. News of the boycotts, though heavily censored, has spread via social media and may put potential buyers off, starving developers of new pre-sales funds.
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