Chinese homebuyers in dozens of cities have stopped making mortgage payments for unfinished projects, according to industry groups, adding to fears of financial contagion in the country’s troubled real estate sector.
Authorities launched a crackdown on the property sector’s excessive debt in 2020, and giants like Evergrande and Sunac have struggled to make payments and renegotiate with creditors ever since.
Recently, a growing number of homebuyers have refused to make mortgage payments unless developers resume construction of units already sold.
As of Wednesday, homebuyers had stopped paying for units in at least 100 residential projects in 50 cities, according to data from research firm China Real Estate Information Corporation (CRIC).
That was an increase from 28 projects on Monday and 58 on Tuesday, according to a report by analysts at financial firm Jefferies.
“The names on the list have doubled every day for the past three days,” they said.
These include projects that have faced significant delays and others whose delivery date is yet to be met, the report said, adding that the incident will dampen buyer sentiment and weigh on a recovery in sales.
If every homebuyer defaults, bad loans will rise by 388 billion yuan ($58 billion), Jefferies said.
The buyers’ actions come after postponed deliveries of pre-sold homes, unclear delivery times and halted construction, Nomura analysts said in a report Thursday.
“Pre-sales are the most common way to sell houses in China, so the stakes are high there,” it said.
“We are particularly concerned about the financial impact of homebuyers’ movement to halt mortgage repayments, as China’s real estate downturn may finally negatively impact onshore financial institutions.”
The developments come at a time of slowing growth in China and weak property sales, raising the risk of stability ahead of the Communist Party’s 20th Congress this fall, when President Xi Jinping is expected to win another term.
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