Home News Chinese property crisis intensifies as mortgage boycotts rise

Chinese property crisis intensifies as mortgage boycotts rise

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New data from Citi Group shows the number of bad mortgages in China hit a record high.

The investment bank’s China research arm said in a recent memo to clients that it believes more than 29% of all China property loans will be in trouble in the first half of 2022. This is an increase of around 5% from the end of 2021.

Citi has invested much of its distressed debt in Troubled private sector developers such as China Evergrande.

As quoted by Bloomberg, the report said, “There are repercussions from POE developer defaults, making it difficult for even some SOE developers to raise funds and increasing the risk of default.”

The data shows that the Chinese government’s “nationalization through stealth” model to save debt-ridden developers from total collapse has so far boosted the country’s $60 trillion real estate sector. It shows no effect.

With this tactic, the government chose to facilitate asset sales to state-owned enterprises rather than bail out developers directly.

For example, the excerpt below from Asia Markets shows China Evergrande’s latest asset sale, including a Chinese state-owned enterprise.

Screenshot 2022 09 19 at 7.54.01 pm China property

The problem for China, however, is that effectively nationalizing troubled developers won’t stave off an impending mortgage crisis.

mortgage boycott

As Asia Markets announceda GitHub repository compiled by observers and investors in China’s property market, tracks the growing mortgage boycotts across the country.

The repository has been updated more than 1050 times since it was published two months ago, after the record was censored on Chinese social media.

342 unfinished construction projects now show evidence of apartment buyers boycotting mortgages, up from 325 when Asia Markets first analyzed.

S&P is: Said About the August mortgage boycott.

“Home buyers for a project under construction in Jingde, Jiangxi, collectively decided in June to stop making mortgage payments, complaining that work on the site was interrupted. Shortly thereafter. , it was reported that more than 300 project buyers in 19 municipalities had joined a mortgage boycott.

“In the base case of 20% of unfinished projects by developers in distress facing delays, Ratings estimates that if a buyer refuses to pay a mortgage, 974 billion yuan of such loans will be impacted. , which accounts for about 2.5% of China’s mortgage loans and 0.5% of total loans.

At the time, however, S&P expected the boycott to be relaxed. It actually seems to be on the rise, with Chinese investors clinging to mortgages on seemingly unfinished apartments, demonstrating a level of defiance that’s really seen in modern China.

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