China Extends Loans To Property Developers Amid Revolt By Buyers
As a rising mortgage boycott by purchasers exacerbates the country's real estate troubles, China's banking regulator has committed to increase lending to help developers finish stalled projects and revive buyer demand, Laura He reported for CNN Business on July 22, 2022.
Photo Insert: Last year, Evergrande, the country's most indebted developer, raced to acquire funds to repay lenders.
The China Banking and Insurance Regulatory Commission (CBIRC) announced Thursday that it will provide "active credit support" to property developers in order for them to finish delayed or stopped projects.
It also advised banks to make additional mortgage loans to suitable homebuyers in order to boost demand and stabilize the housing market. Previous initiatives to increase property lending, according to the regulator, have been successful.
Mortgage rates have risen after the People's Bank of China decreased mortgage rates for first-time buyers by two-tenths of a percentage point in May. Almost all mortgage loans — 90 percent — have gone to first-time house buyers.
"The current lending pace for property-related loans has reached the fastest pace since 2019," said Liu Zhongrui, a CBIRC official, at a news briefing in Beijing on Thursday. Last month, fresh bank developer loans totaled 52.2 billion yuan ($7.7 billion), according to Liu.
The offer is the latest in a series of steps by Chinese officials to calm a widespread homebuyer revolt.
An increasing number of angry homeowners are refusing to pay mortgages on unfinished projects, exacerbating the country's housing troubles and prompting fears of a systemic financial crisis and social upheaval.
The campaign demonstrates how a liquidity crisis affecting developers is affecting other segments of society. The issue arose in 2020, when Beijing clamped down on excessive borrowing by developers in order to rein in their huge debt and slow the rise in property prices.
Last year, Evergrande, the country's most indebted developer, raced to acquire funds to repay lenders. As the real estate market cools, prominent corporations are seeking creditor protection. Due to the developers' funding difficulties, many projects around the country have been delayed or suspended.