China urges banks to support property sector after mortgage boycott

A consumer boycott has heightened fears of financial contagion in China's troubled real estate sector

China's banking regulator has urged lenders to extend more credit to real estate developers, as a growing number of homebuyers withhold mortgage payments on unfinished housing projects across 50 cities.

Furious at postponed deliveries of pre-sold homes, unclear delivery times and halted construction, homebuyers were last week reported to have halted payments for already sold units in at least 100 residential projects, according to data from industry groups and analysts.

Analysts have called it a "vicious cycle" that would further dampen consumer confidence, following last week's dismal Q2 growth figures that were the worst since the pandemic. 

They were also asked to "do a good job in customer service... abide by contracts, fulfill commitments, and protect the legitimate rights and interests of financial consumers".

Authorities launched a crackdown on excessive debt in the property sector in 2020, leaving giants like Evergrande and Sunac struggling to make payments and forcing them to renegotiate with creditors as they teetered on the edge of bankruptcy.

"The recent mortgage boycott revealed the spillover in the property sector rout from the bond defaults to unfinished real estate projects," said Ken Cheung, chief Asian FX strategist at Japanese bank Mizuho. 

Regulators met banks last week to discuss the growing consumer mortgage boycott, Bloomberg News reported, as more major Chinese developers teeter on the brink of default. 

"Deposits and advance payments for real estate development enterprises fell by 37.9 percent year-on-year in the first half of 2022," Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence, told AFP.

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