In China, more and more homeowners are choosing not to pay off their mortgages
For four years, Mr. Zhang (he only gives his last name) had dutifully paid off his home loan. But every month he spent the 5,800 yuan (839 euros) in monthly installments with a little more bitterness: Because the construction of the apartment, which he had bought for 1.43 million yuan as planned, had not progressed since the end of 2019. He had other owners closed tried to mobilize by demonstrating first in front of the real estate developer’s offices, then at the local authorities. Without success.
When a group of disgruntled homeowners decided to boycott their mortgages in Jingdezhen, east China, Mr. Zhang didn’t hesitate. In the WeChat group (the dominant social network in China) of the owners of his residence under construction, everyone agreed to join the movement. “There is no other way: it is pointless to defend our rights with the government. The only leverage we have is to stop paying.”explains the engineer from Zhengzhou, the capital of Henan province, 700 kilometers southwest of Beijing.
A particularly effective lever: the movement has spread like wildfire throughout China. Thousands of projects have been put on hold since 2020 due to a latent real estate crisis. Today, more than 300 homeowner groups in 91 cities announced a refund strike. A risk for local banks, which are already faced with numerous project promoter defaults. So far, Chinese households have been considered by economists to be better payers than companies.
Hundreds of projects on hold
According to Chinese banks, 2.1 billion yuan in loans have been affected so far, but a total of 2 trillion yuan could be at risk, said GF Securities, a Chinese investment bank. Is the crisis enough to endanger the Chinese financial system? Probably not, as the authorities retain control of the financial system and can inject liquidity if needed. But their quick response shows they take the issue very seriously.
On Monday, July 25, Chinese developers saw their share prices soar after information suggested the establishment of a real estate bailout fund. Three days earlier, Premier Li Keqiang had called for action “which promote the development of a healthy and solid real estate market”, relating in particular to a public fund. According to Bloomberg agency, it should be used primarily to complete interrupted projects and would already be endowed with 80 billion yuan, a sum that could be increased to 200 billion or 300 billion yuan. On Monday, Hong Kong Stock Exchange’s Guangzhou R&F Properties rose 9.1% and Country Garden rose 8%.
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