The number of Chinese homebuyers boycotting their mortgage repayments in protest at unfinished buildings has spread to more than 300 locations across the country, according to a GitHub page documenting the action.
Mortgage boycotts are being organized by buyers of property in 12 unfinished projects in the southwestern megacity of Chongqing, seven in Shanghai, eight in Guangdong province, nine in Nanning and 10 in Taiyuan, with hundreds of other locations reported throughout China, reports posted by homebuyers to the WeNeedHome GitHub page showed.
Buyers have been left high and dry after buying apartments off-plan, or before completion, only to find that developers have downed tools and abandoned half-finished buildings they once hoped to call home, or use as an investment.
Now, they are increasingly banding together and issuing “mortgage repayment suspension notices” to lenders, with both sides calling on the government to act in their favor.
“In an attempt to keep payments going, buyers made repeated trips to the relevant government departments and agencies in charge to request assistance and to stand up for our rights,” a statement issued by buyers of apartments in an unfinished complex in Dalian’s Lüshunkou district wrote.
“But there seems to be no sign that work will ever start again on the development,” it said.
Another statement from buyers in Hantou county, Changde city says: “We have been forced to stop mortgage payments due to the huge losses sustained by the majority of buyers.”
Meanwhile, a statement from buyers in the northern city of Taiyuan accuses banks of fueling the crisis by illegally transferring loans to developers, refuses to issue any more monthly repayments until the buildings are finished, and calls for an end to “punishments” handed down to buyers who take such action.
Xie Tian, a professor of business studies at the University of South Carolina, said the movement could have a serious impact on the Chinese economy.
“The suspension of mortgage repayments can lead to systemic financial problems … because of the large sums of money involved,” Xie told RFA. “Also, these are middle-class people with money and assets.”
Drop in investment
China’s National Bureau of Statistics released data on Aug. 15 showing a 6.4 drop in investment in real estate development between January and July this year, with teal estate investment falling by 12.3 percent year-on-year in July.
Newly started projects fell by 45.4 percent year on year, the biggest fall since February 2013, and loans made to developers by Chinese banks fell by 36.8 percent in July, Reuters reported.
U.S.-based financial journalist Wang Jian said rumors were reported that the Chinese government would support banks to issue loans to developers get the buildings finished, but so far had yet to be substantiated.
“There are several issues to be resolved here, because they can’t accidentally bury the banks, which are carrying a great deal of risk,” Wang said. “On the one hand, you have the individual buyers, the victims of the unfinished buildings crisis, and on the other is the banks.”
“If they lend more money to developers, it could create more bad debts and an eventual collapse [in the banking system],” he said.
“The only solution [for buyers] is to boycott mortgage repayments and force the suspension of the mortgages, which will drag the commercial banks into the water too,” Wang said.
“If that continues, the commercial banks will collapse, because that’s where the money is coming from in the first place.”
And buyers aren’t the only ones protesting.
On Aug. 2, a group of property developers in the eastern city of Hefei called on the local government this month to crack down on what they described as “malicious protests” by homebuyers, Reuters reported.
The letter is one of the first known efforts by developers joining together to push back against a spreading revolt by homebuyers, who have threatened to stop paying mortgages on hundreds of unfinished housing projects, the agency said.
It quoted a developer as saying that the government had “stepped in” and held meetings with both sides following the letter.
Translated and edited by Luisetta Mudie.