Analysis: China’s mortgage boycott regroups quietly as construction slows

Surveillance cameras are seen near residential buildings under construction in Shanghai, China July 20, 2022. REUTERS/Aly Song/File Photo

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BEIJING, Sept 19 (Reuters) – Two months after many Chinese buyers stopped paying their mortgages to protest against the blocking of the construction of their properties, the lack of progress on other sites now threatens to intensify the boycott, despite assurances from the authorities.

The mortgage protest has become a rare act of public disobedience in China, pushed via social media in late June and forcing regulators to scramble to offer homebuyers loan payment holidays of up to six months. and promises to speed up construction.

But with no signs of construction resuming at many projects and clear guidelines from local authorities, more buyers told Reuters they planned to join others who have stopped paying mortgages.

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Wang Wending, from the central city of Zhengzhou, said he was allowed to delay mortgage payments on his apartment for six months in late July.

However, he will have to pay the installments due in one go at the end of the moratorium, regardless of the state of construction, which has not yet started.

“What will we do if construction still does not resume after six months? We will directly stop all payments, he said.

Homebuyers in at least 100 cities have threatened to suspend mortgage payments since late June as developers stopped building projects due to tight financing and strict COVID-19 restrictions.

The threat of another mortgage boycott comes as China prepares to hold the Communist Party Congress next month, with efforts to revive an economy plagued by housing crisis.

While social media censorship has blocked posts and deleted videos of the protests, largely removing them from the public spotlight, the boycott has nonetheless spread.

A widely watched list on open-source site GitHub titled “We Need Home” showed the number of projects across China whose buyers joined the boycott at 342 on September 16, up from 319 at the end of July.

“The government is focused on social stability and hasn’t thought about solving the problem of unfinished projects,” said Qi Yu, a homebuyer in the southeast city of Nanchang. “We can’t do anything if the government doesn’t help us.”

Qi has not paid off her 1 million yuan mortgage since July.

The governments of Zhengzhou and Nanchang did not respond to faxed requests for comment.

Authorities in Zhengzhou, the epicenter of the protest, have pledged to start building all stalled housing projects by October 6, people with knowledge of the matter told Reuters. Read more

The city will use special loans and urge developers to return misappropriated funds and real estate companies to file for bankruptcy, the sources said.

“APPEASE THE OWNERS”

The mortgage boycott added to worries about a protracted slump in China’s property market, which has gone from crisis to crisis since mid-2020 after regulators stepped in to reduce leverage.

Beijing unveiled measures including cutting borrowing costs and helping local governments set up bailout funds to prop up the property market.

While that is assured to some homebuyers, others say they have been forced to remain silent amid a crackdown on dissent.

In Zhengzhou, Ashley, 30, who gave only her first name, said that while construction on her apartment resumed in the second quarter, only a handful of people were working on the site to, she said, “appease the owners “.

Ashley told Reuters she and other owners of the development were warned not to travel to Beijing to protest after the Zhengzhou government repeatedly canceled meetings with homebuyers.

“I got a call from the police this week, they asked me not to bypass them to protest to higher authorities,” she said. “They said I should talk to the local government first, and if they can’t solve the problem, they can pass the message on to us.”

Ashley showed Reuters a phone log showing police called her 15 times in one day earlier this month. The Zhengzhou Ministry of Public Security declined to comment.

RESCUE

About 2.3 trillion yuan ($43.02 billion) in loans are at stake if all unfinished projects end in mortgage boycotts, representing 6% of total mortgages, Natixis said in a report on last month.

Beijing has set up a bailout fund worth up to $44 billion and $29 billion in special loans for unfinished projects to restore confidence, sources said.

Sources at property developers and banks, however, said it could take time for these funds to make a difference.

“There won’t be money for everyone,” said a senior executive at a Shanghai-based developer.

A homebuyer from the China Evergrande Group (3333.HK) project in Hefei said he was due to receive his apartment in 2020, but construction has stalled for four years.

Buyers of this project began protesting last year and joined the wider boycott in June, said the buyer, who declined to be named.

Evergrande said company chairman Hui Ka Yan pledged in an internal meeting last week to return all construction to normal by the end of September.

Of Evergrande’s 706 projects, 38 have not resumed construction, while 62 are only now restarting.

“We will no longer pay mortgages if we don’t see any meaningful results,” the person said, adding that partial construction had resumed in late August with only about 20 workers.

“We will continue to protest – we will go to Beijing.”

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Reporting from Beijing and Shanghai newsrooms and from Clare Jim in Hong Kong; Editing by Sumeet Chatterjee and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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