Chinese homebuyers have decided to stop paying mortgages as real estate developers have persistently delayed the completion of construction projects across the country. According to Bloomberg, buyers of 35 projects across 22 cities refused to pay mortgages as of July 12. Bloomberg notes that this could spell trouble for Chinese banks who are already embroiled in China’s property crisis. As banks continue to grapple with challenges from liquidity stress among developers, they now also have to deal with the impending risk of default from homebuyers. These defaults could potentially cause non-performing loans across Chinese banks to reach RMB 561bn ($83bn), about 1.4% of the outstanding mortgages. Additionally, the nonpayment of mortgages has also been driven by falling housing prices, Bloomberg adds. Average selling prices of property projects in 2022 were 15% lower than that of the last 3 years, according to Citigroup’s research. The latest developments have come at a time where new waves of Covid cases in China are making the re-imposition of restrictions a likely possibility, further jeopardizing the completion of real estate projects.
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