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Households Hit Hard By The Property Crash!

It started as an act of protest by fed-up apartment buyers in a single project in a city in central China. Now tens of thousands of people around the country are withholding payments on their mortgages for homes that developers, including China Evergrande Group, have yet to finish.The movement has since spread to at least 301 projects in about 91 cities according to figures from a crowdsourced document titled “WeNeedHome.”

Tracking the extent of the protest has grown increasingly difficult after China began censoring in mid-July crowdsourced online documents tallying the number of boycotts. Such shared files have been a key source of data for global investors and researchers.Real estate accounts for about 78% of household wealth in China—double the US rate—and families typically save for years and borrow from friends and family to purchase a home. As the Evergrande debacle unfolded last year, many market watchers said that the financial contagion would be limited by the fact that homebuyers in China often pay in cash. But some did use mortgages, and the boycott underscores how much of the pain of the crisis has fallen on households.

China’s outstanding mortgages stood at 38.3 trillion yuan at the end of 2021, according to the People’s Bank of China.

GF Securities Co. expects that up to 2 trillion yuan ($296 billion) of mortgages could be impacted by the collective refusals. That’s the total balance of the loans; the amount that could be withheld will be smaller.Should every buyer default, that would lead to a 388 billion-yuan increase in nonperforming loans, Jefferies’s said.

Banks say the impact is much lower still. Lenders have detailed about 2.11 billion yuan of loans at risk from the protests, according toa tally of banks that have disclosed their exposure.

The wildcat boycott on loans worth as much as 2 trillion yuan ($296 billion) threatens to deepen China’s real estate slump by shifting focus from the country’s embattled property companies to its massive banks. Lenders have relied on mortgages as their safest source of revenue as Covid lockdowns stifle growth.

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Caveat Emptor! Note: this is NOT financial or property advice!!

Written by Walk The World

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  1. SAFE AS HOUSES PAIR OF TROUSERS.

    Not really though.

    Martin you should look into the CCP pushing government workers to lead the way and buy more, but most of them are mortgage free and have no desire to expose themselves to risks.

  2. The real question is…what is the actual pain threshold regarding interest rates that the avg Australian household can withstand? One would think the big banks and the RBA know exactly what that number is…I assume probably between 5-6% actual mortgage rate (currently around 4%). Pushing it beyond that point would then perhaps lead to an actual wave of mortgage defaults…thoughts?

  3. Thanks Martin. While details may vary a collapsing property bubble, rising interest rates and materials shortages and delays seems to characterise world markets. The timeframe may vary but the outcome seems universal. 🤓🇦🇺

  4. I imagine a lot of Chinese are off loading over seas property to back up there losses at home . In 2016/17/18 Chinese we’re buying Irish property at auctions over the phone or online without even looking at it and paying way over asking price.as schiff says the sequel is always worse then the original.

  5. Isn't government control wonderful … just ask a Chinese investor. To think people here actually want a government owned and controlled bank, that is like wanting a steam engine when the space shuttle was invented. The last thing we need is more central government control or manipulation and the future is decentralised and self custody of your money and assets.

  6. The high prices are why Xi pushed for lower prices. It was causing other problems in society. The solution in China and elsewhere is for legislation to make banks fund the projects to completion. This way there will be surplus properties that can drive down prices long term. What happens now is that they stop construction and that limits supply creating a floor under property prices reinforcing the social problems.

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