Home sales in China plunge in July as a mortgage riot deters buyers

A nascent two-month recovery in China’s home sales ended in July as a widespread mortgage revolt on concerns that troubled property developers could not yet deliver unfinished apartments weighed on demand.

Sales at the country’s top 100 real estate developers fell 39.7 percent in July from the same period last year to $77.6 billion, or 523.14 billion yuan, according to data released on Sunday by CRIC, a Chinese real estate data provider. .

July sales fell 28.6% from June, ending a two-month rebound in month-over-month sales growth. Apartment sales showed increases in May and June compared to previous months as activity picked up following the Covid lockdowns in Shanghai and other Chinese cities earlier this year.

China’s private-sector real estate developers continued a years-long debt-fueled building boom, selling homes before they were built, until a financing crisis that began last year led to bankruptcies and stalled projects. Buyers who would normally sink big down payments on these homes have been expressing their frustration all summer.

Home sales in China often experience a lull in July as developers rush to close sales in June to meet first-half targets. But analysts said the main drag on activity this time around was the mortgage revolt and its impact on would-be homebuyer confidence.

The riot began in late June at an Evergrande project in Jingdezhen, central China’s Jiangxi province, where frustrated home buyers threatened to refuse mortgages on unfinished properties. Hundreds of buyers from about 320 projects across the country have followed suit through July 29, according to a tally of statements from homeowners who said they will stop paying their mortgages that is posted on GitHub, a Microsoft Corp.

-proprietary coding-collaboration site.

Homebuyers—some waving signs that say “Construction Stops and Mortgages!”—say threatening to stop payments is the only way to make their voices heard as projects stall and delivery times lag. A generally slowing economy that is biting into employment and incomes is adding to the pressure. Some buyers say they’re increasingly reluctant to keep paying for a home they’re not sure they’ll ever get.

The weekly data compiled earlier by the CRIC to study the impact of the mortgage riot had marked the decline in July. In 30 cities CRIC judged to be severely affected by the insurgency, sales of new homes fell 12% in the week ending July 10 from the previous week, and then fell 41% in the week ending July 17.

More home buyers are opting for second-hand homes or new ones built by government developers, which are usually in a stronger financial position.

As foreign investors and homebuyers lose confidence in China’s property market, developers are offering cars and pigs to boost sales. The WSJ examines the ads and policies to see how the country’s real estate turmoil could ripple through the global economy. Composite photo: Sharon Shi

Pressure on the government is mounting, but hopes for a major property rescue package from Beijing remain unfulfilled. The Politburo, China’s top policymaking body, recently made it clear that local governments are ultimately responsible for fixing property problems in their markets.

Local authorities with tight budgets have been pressed to boost demand for property, resorting to increasingly creative measures. Dozens of cities have reduced down payments and interest rates. Some offer direct cash grants. Others have announced relief funds for cash-strapped developers or plans to take on troubled projects.

“But the sector will not stabilize if developers’ liquidity crunch is not alleviated,” said Song Hongwei, director of research at Tongce Research Institute, which monitors and analyzes China’s property market.

On Friday, troubled property developer China Evergrande Group outlined a plan to restructure billions of dollars in debt and said its contracted apartment sales in the first six months of the year had fallen about 97% from the same period a year earlier. .

Write to Cao Li at li.cao@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published.