The China Banking and Insurance Regulatory Commission (CBIRC) reiterated on Thursday that it will provide “active credit support” to property developers, so that they can complete delayed or stalled projects as soon as possible.
He also urged banks to provide more mortgages to qualified buyers to sustain demand and support the housing market.
Mortgage lending rose after the People’s Bank of China cut mortgage rates by two tenths of a percentage point in May for first-time home buyers. Almost all – 90% – of mortgage loans
were granted to first-time buyers.
“The current pace of real estate-related lending has reached the fastest pace since 2019,” Liu Zhongrui, a CBIRC official, said at a press conference Thursday in Beijing.
Last month, new developer loans issued by banks also reached 52.2 billion yuan ($7.7 billion), Liu added.
The pledge is the latest in a series of moves by Chinese authorities to quell a revolt by homebuyers across the country. A growing number of disgruntled buyers are refusing to pay mortgages on unfinished projects, compounding the country’s housing problems and raising concerns about a systemic financial crisis and social unrest.
The move is a sign of how the cash crunch faced by developers is spilling over to other aspects of society.
The problem began in 2020, when Beijing began cracking down on excessive borrowing by developers in a bid to contain their high debt loads and rein in house prices. The crisis deepened last year when Evergrande – the country’s most indebted developer – scrambled to raise funds to repay lenders. As the real estate sector cools, several large companies seek protection from creditors. Many real estate projects across the country have been delayed or put on hold due to developers running out of cash.
Public anger is growing over the stalled projects, as many homebuyers had started paying off their mortgages before they got the new property. In China, real estate companies are allowed to sell homes before they are completed and use the funds to finance
construction. This is the most common way to sell homes in the industry.
The mortgage boycott could lead to an increase in bad loans at banks and further dampen sentiment in the real estate sector, analysts said. If sales continue to decline, developers could face a bigger cash flow problem, which could lead to more defaults and project delays, creating a vicious circle in the market. The real estate crisis will also strain the economy and the financial system – real estate and related industries account for up to 30% of China’s GDP.
Earlier this week, the city of Zhengzhou in central China set up a bailout fund for property developers to deal with unfinished projects, one of the first bailout measures by local governments to combat the mortgage boycott.
The fund will be jointly established by Zhengzhou-based Henan Asset Management and Zhengzhou Real Estate Group, according to a statement released by the asset manager on Tuesday. Zhengzhou is the capital of central Henan Province and is currently at the center of the nationwide mortgage boycott.
Both companies are supported by local governments in the province.
The fund will be used to “relaunch problematic real estate projects and bail out struggling developers,” the statement said, without disclosing the size of the fund.