HomeBusinessProperty Investment Came At The Website Of The Mortgage Contraction In China...

Property Investment Came At The Website Of The Mortgage Contraction In China Over The Next Three Years.

The China Banking Regulatory Commission has set new lending goals to help developers and homebuyers finish stalled development projects and raise buyers’ demand. The rise in mortgage protests is making real estate development more challenging in China.

The China Banking and Insurance Regulatory Commission (CBIRC) has told banks to issue more mortgage loans to qualified homebuyers to support demand and prop up the property market. It also urged banks to complete stalled or delayed projects as soon as possible. The regulator said previous efforts to boost property lending have been working—mortgages have increased after the People’s Bank of China cut mortgage rates by two-tenths of a percentage point in May for first-home buyers. Substantially all—90%—of mortgage loans have been issued to first-home buyers.

The speed at which property loans were issued reached the highest rate since 2019 on Thursday, at a brief meeting held at the base of CBIRC headquarters in Beijing, as Liu Zhongrui, an official at the Central Bank of China, was quoted saying in the meeting. Last month, new developer loans reached 52.2 billion yuan ($7.7 billion), he added.

The Chinese government has issued a pledge to homebuyers, in a move aimed at appeasing them. The pledge is the latest among a series of moves made by Chinese authorities to appease a homebuyer revolt nationwide. A growing number of disgruntled homebuyers are refusing to pay mortgages on unfinished projects, aggravating the country’s real estate woes and raising concerns about a systemic financial crisis and social unrest. The movement is a sign of how liquidity problems facing developers are spilling over to other aspects of society. The problem began in 2020, when Beijing started cracking down on excessive borrowing by developers in order to rein in their high debt and curb runaway housing prices. The crisis escalated last year when Evergrande — one of the highest-leveraged developers in China — scrambled to raise cash from investors in order to repay lenders. As the property sector cools off, several major companies are seeking protection from creditors because they can no longer afford interest payments on their debt burden. Many property projects across the country have been delayed or suspended due to developers’ cash crunch.

Much of the rage in the marketplace is on account of property buyers who have fixated on repaying their loans before their new homes are completed. In China, real estate agents are permitted to sell their obtainable residences before it’s finished and borrow the funds to fund its construction. It’s the dominant pattern of industry brokerage in China.

It’s possible that the mortgage boycott will cause rising bad loans at banks and dampen the sentiment further in the property sector, according to analysts. If sales decline further, developers could face a bigger cash problem, which might lead to more debt defaults and project delays, creating a vicious cycle in the market. The property crisis will also place a major strain on the economy and financial system — real estate and related industries account for as much as 30% of China’s GDP. Earlier this week, the central Chinese city of Zhengzhou set up a property developer bailout fund to address unfinished projects, one of the first bailout measures by local governments to tackle the mortgage boycott. The fund will be jointly set up by Zhengzhou-based Henan Asset Management and Zhengzhou Real Estate Group, according to a statement by Henan Asset Management on Tuesday. Henan is one of China’s most populous provinces and borders several other provinces where there have been reports of protests against developers who have failed to deliver on promised prices for properties sold to investors. It is currently at the center of nationwide protests against developers amid claims that some have failed to deliver on promised prices for properties sold to investors.

The government will support areas that are struggling to revive problematic property projects and compensate developers who are facing problems. The fund’s size is unknown.


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