Home prices in China plummet as buyers refuse to pay mortgage

China’s once-booming real estate sector, a mainstay of economic growth, is rapidly losing its luster with new home prices in several major cities. It could work Chinaof economic recovery at a time when it is just emerging from the harsh Covid 19 lockdown shock. The real estate sector accounts for around 30% of China’s GDP.

In June, average new home prices fell 0.5% year-on-year, after falling 0.1% a month earlier, according to the data website. Trade economy revealed.

The problem is deeply rooted. Non-payment would impact the country’s banking sector as non-performing assets will accumulate further. The shadow banking sector, which includes trust companies and is an important source of funding for Chinese developers, will also be affected, Peterson Institute of International Economics (PIIE) said in a blog post.

Although Beijing has started to fight the fires to stabilize the situation by asking banks to facilitate loans to property developers, homebuyer confidence is at an all-time low. The authorities are even considering developing a program to facilitate the freezing of mortgage payments for buyers who have not received the apartments.

“There is a real crisis situation in China and the authorities are aware of it. They are taking all the necessary measures to remedy it. But we will have to wait and watch to understand how things evolve in the months to come,” said a a person involved in the education sector in China said Story from India.

The crumbling of real estate behemoths Evergrande Group last year then the fall of several other real estate giants shook the market. New home prices have been falling steadily for a year. As demand for new homes, considered one of the safest investment options for Chinese people, rose until last year, developers continued to increase their debt levels.

Total debt level stood at around $5.2 trillion in June 2021, according to the financial services firm nomura.

Homebuyer protests have become commonplace. Earlier this month, thousands of homebuyers announced on social media that they would not be paying off their mortgages. Protests escalated and spread to 100 cities across the country. Briefing China said the homes in question were acquired through a prepayment model, in which buyers acquire apartments that are unfinished — or in some cases not yet started — when initial deposits are paid and developers are required to hand over houses within a stipulated time.

But amid overambitious development plans, exorbitant debt and a toughening regulatory environment aimed at deleveraging the industry, many have failed to do so. “That left some households making mortgage payments for several years before they could move in,” he said.

Will it be China Lehman Brothers moment?

(Content is released under agreement with indianarrative.com)


From avatars to hiding online status – list of major new WhatsApp features coming soon

India has the highest rate of women taking action against harassing calls and messages


About Author

Comments are closed.