China’s banking regulator has pledged to boost lending to help developers complete stalled real estate projects and boost buyer demand as a growing boycott of mortgages by homebuyers exacerbates the country’s real estate woes.
The China Banking and Insurance Regulatory Commission (CBIRC) reiterated last Thursday that it will provide “active credit support” to real estate developers so they can complete delayed or stalled projects as quickly as possible.
It also called on banks to issue more mortgage loans to qualified homebuyers to support demand and prop up the housing market.
The regulator said past efforts to increase home loans are working. Mortgages rose after the People’s Bank of China cut mortgage rates by two-tenths of a percentage point in May for first-time homebuyers.
Virtually all – 90% – of mortgage loans were issued to first-time homebuyers.
“The current lending pace for property-related loans has reached the fastest pace since 2019,” Liu Zhongrui, a CBIRC official, said at a Thursday press conference in Beijing.
Last month, new developer loans issued by banks also reached 52.2 billion yuan ($7.7 billion), Liu added.
The pledge is the latest in a series of measures by Chinese authorities to quell a revolt by homebuyers across the country.
A growing number of disgruntled buyers are refusing to pay mortgages on unfinished projects, compounding the country’s real estate woes and raising concerns about a systemic financial crisis and social unrest.
The move is a sign of how the liquidity crisis faced by developers is spreading to other aspects of society.
The trouble began in 2020, when Beijing began cracking down on excessive borrowing from developers in a bid to stem its high debt and contain runaway property prices.
The crisis worsened last year as Evergrande – the country’s most indebted developer – struggled to raise money to pay creditors. As the real estate industry cools, several large companies seek protection from creditors.
Many real estate projects across the country have been postponed or suspended due to the developers’ cash crunch. Public anger is growing over the stalled projects, as many homebuyers have started paying off mortgages before they own the new property.
In China, realtors can sell houses before they are completed and use the funds to finance construction. It is the most common way of selling homes in the industry.
The mortgage boycott could cause bad loans to rise at banks and further dampen sentiment in the housing sector, analysts say.
If sales drop further, developers could face a bigger cash problem, which can lead to more defaults and project delays, creating a vicious cycle in the market.
The housing crisis will also put great pressure on the economy and financial system – the real estate sector and related industries account for up to 30% of China’s GDP.
Earlier this week, the central Chinese city of Zhengzhou created a rescue fund for real estate developers to deal with unfinished projects, one of the first rescue measures by local governments to fight the mortgage boycott.
The fund will be jointly created by Zhengzhou-based Henan Asset Management and Zhengzhou Real Estate Group, according to a statement from the asset manager on Tuesday. Both companies are supported by the local governments of the province.
The fund will be used to “revive troubled real estate projects and rescue struggling developers,” the statement said, without disclosing the size of the fund.
Source: CNN Brasil
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