Delays in Apartment Construction in China... Nationwide Spread of Cases Refusing Mortgage Loan Repayments

[Image source=Yonhap News]

[Asia Economy Reporter Kwak Min-jae] As apartment construction delays continue in China, buyers who purchased these apartments are increasingly refusing to repay their mortgage loans across the country.

According to Bloomberg on the 13th (local time), Griffin Chan, a Citigroup analyst, analyzed in a report that housing construction projects, including apartments where buyers have decided to stop mortgage repayments in response to construction delays and falling real estate prices, have reached 35 locations in 22 cities across China.

In Zhengzhou City, Henan Province, 28% of new housing construction has been delayed, marking the highest rate of construction delays among major cities.

Bloomberg diagnosed that the mortgage repayment refusal crisis is spreading as the real estate market slump hits China’s middle class hard, escalating into a real estate market crisis and increasing the risk of non-performing loans for banks.

Chinese banks, which have been struggling with liquidity stress, are now pointed out to need to prepare for defaults by homebuyers as well.

Analyst Chan estimated that the bad loans triggered by mortgage repayment refusals in China’s financial sector could reach up to 561 billion yuan (approximately 108.7 trillion KRW), accounting for about 1.4% of the total outstanding mortgage loan balance.

Chinese banks claim this is manageable, but Bloomberg warned that state-owned large banks could face difficulties due to their higher exposure to mortgage loans.

According to Chinese market research firm CRIC statistics, contract sales of the top 100 real estate companies in China from January to June amounted to 3.47 trillion yuan (approximately 671 trillion KRW), a 50.7% decrease compared to the same period last year.

From January to May, the real estate sales area in China decreased by 23.6% compared to the same period last year. Sales value also dropped by 31.5% during the same period.

In May, housing prices in 70 major Chinese cities fell by 0.17% from the previous month, marking the ninth consecutive month of decline.

The slump in China’s real estate market has been cited as a cause of the country’s economic slowdown since the second half of last year.

This content was produced with the assistance of AI translation services.