People in China are refusing to pay their mortgages in droves: why is this happening, and what is the risk?
Residents of 22 cities in China have refused to pay their mortgages — they such sharply reacted to the protracted construction of facilities.
In total, this protest was made by buyers of 35 projects located in the cities of Zhengzhou, Changsha, Kunming, Fuzhou and Yancheng. Cessation of payments on the mortgage carries the following risks: an increase in bad debts to $83 billion and worsening the existing crisis in the real estate market in the Middle Kingdom. That’s what analysts at Citigroup Inc. wrote in a research report.
While continue to fall, the situation in the market remains quite difficult: over the past 3 years, the cost of buying residential real estate exceeded the average price of their sales by 15%.
To make matters worse, Chinese banks have cut lending to real estate developers by a third in recent months. Subsequently, this could lead lenders to defaults by homebuyers.
Among the banks in the most vulnerable position are state-owned lenders China Construction Bank, Postal Bank, and ICBC. The banking industry could also face difficulties if restrictions are reintroduced in the country because of Covid-19.