Beijing [China], August 18 (ANI): In a rare act of defiance, Chinese homebuyers across the country who bought property from indebted developers are refusing to repay loans on their unfinished apartments.
Daisuke Wakabayashi, writing in The New York Times (NYT) said that as China's economy stumbles, homeowners are boycotting mortgage payments.
For decades, buying property was considered a safe investment in China. Now, instead of building a foundation of wealth for the country's middle class, real estate has become a source of discontent and anger.
The boycotts in more than 100 cities across China are part of the fallout from a its worsening economy, slowed by Covid lockdowns, travel restrictions and wavering confidence in the government.
Moreover, China's social credit system punishes infractions -- such as failure to repay loans -- by limiting an individual's ability to travel, get their children into school or borrow from banks in the future.
The number of properties where collectives of homeowners have started or threatened to boycott has reached 326 nationwide, according to a crowdsourced list titled "WeNeedHome" on GitHub, an online repository, reported NYT.
ANZ Research estimates that the boycotts could affect about USD 222 billion of home loans sitting on bank balance sheets, or roughly 4 per cent of outstanding mortgages.
The country's economy is on a path for its slowest growth in decades. Its factories are selling less to the world, and its consumers are spending less at home. On Monday, the government said youth unemployment had reached a record high, reported NYT.
"Life is extremely difficult, and we can no longer afford the monthly mortgage," homeowners in China's central Hunan Province wrote in a letter to local officials in July. "We have to take risks out of desperation and follow the path of a mortgage strike."
The mortgage rebellions have roiled a property market facing the fallout from a decades-long housing bubble. It has also created unwanted complication for President Xi Jinping, who is expected to coast to a third term as party leader later this year on a message of social stability and continued prosperity in China.
So far, the government has scrambled to limit the attention garnered by the boycotts. After an initial flurry of mortgage strike notices went viral on social media, the government's internet censors kicked into action. But the influence of the strikes has already begun to spread, reported Daisuke.
When a rural bank froze withdrawals in Henan Province in central China, it set off a violent showdown between depositors and security forces. Recent college graduates are struggling to find work with youth unemployment at 20 per cent. Small businesses, the biggest provider of jobs, are fighting to survive under the constant threat of COVID-19 lockdowns.
On Tuesday, Chinese Premier Li Keqiang visited the southern technology hub city of Shenzhen and urged a "heightened sense of urgency" for an economic recovery. But the property sector presents a unique set of challenges, reported Daisuke.
Real estate drives about one-third of China's economic activity, by some estimates, and housing accounts for about 70 percent of household wealth, making it the most important investment for most Chinese people.
In 2020, to address concerns about an overheating property market in which homeowners would often buy apartments before they were built, China started to crack down on excessive borrowing by developers.
The move created a cash crunch for many firms that had relied on easy access to debt to keep construction projects humming. As financial strain deepened, Evergrande and other large property developers spiralled into default, and the impact rippled across the industry, reported NYT. (ANI)