China’s real estate crisis is escalating, raising concerns about growing risks in the banking system. Desperate homebuyers across dozens of cities are refusing to pay mortgages on unfinished homes, according to state media reports and economists at international banks.
In China, real estate firms are allowed to sell homes before completing them, and customers have to start repaying mortgages before they are in possession of the new property. These funds are used to finance construction by the developers.
The payment boycott comes as a growing number of projects have been delayed or stalled by a cash crunch that saw giant developer Evergrande default on its debt last year and several other companies seek protection from creditors. Home prices are also falling, meaning buyers may be locked into a property that is now worth less than they agreed to pay.
Analysts fear that a payment strike among homebuyers could lead to further defaults by developers, placing additional strain on China’s banks at a time when the world’s second largest economy is struggling to recover from a sharp Covid-related slowdown.
Source: cnn.com
