South China Morning Post
Tue, August 8, 2023
Dozens of homebuyers in Shanghai have threatened to stop repaying mortgages as they protest against a developer's delay in handing over flats, evoking memories of a nationwide boycott about a year ago that spread to more than a hundred cities as builders were behind schedule due to tight funding and strict Covid-19 curbs.
These warnings reflect the continued stress in China's property market as the government attempts to rebalance the sector, exposing developers to completion risk and marking the first mortgage boycott threat in the mainland's financial and commercial hub where residential units have long been viewed as safe investment amid a property boom.
These boycott warnings come at a time when property sales are sinking and could further pressure the liquidity starved sector. Property sales declined 33 per cent year on year in July, extending a 17 per cent fall in June.
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The One - Rivera Shanghai, a project located on Puyi Road, Pudong, stalled construction due to a liquidity crunch it has faced since early 2022, which forced the company to miss delivery deadlines stipulated in the home purchase contracts.
A view of unfinished residential project The One - Rivera Shanghai on Puyi Road, Pudong. Photo: Zhang Shidong alt=A view of unfinished residential project The One - Rivera Shanghai on Puyi Road, Pudong. Photo: Zhang Shidong>
According to two buyers who asked not to be identified, about 100 people whose flats were not delivered on the due date have written to the developer and relevant housing and financial authorities complaining about the lapse and have warned they would stop making mortgage payments from September if construction did not resume by end-August.
"We, ordinary families, cannot withstand the losses incurred by the unfinished project," the homebuyers said in the letter that was obtained by the Post. "We made the decision [not to repay the mortgage] unless government authorities step in to ensure a resumption of construction."
The developer, Shanghai Dongying Real Estate, could not be reached for comment.
The project comprises about 300 flats in two buildings. Homes in the first building were expected to be delivered to buyers by March 12, 2022 and the delivery date for the second lot was December 10, 2022.
"The protests left local authorities red-faced because a [potential] mortgage boycott would point towards the city's unsuccessful policies governing the significant real estate market," said Bob Fu, a senior manager with property agency Baonuo in Shanghai. "It remains to be seen whether the ripple effect will spread to other projects in the city."
The One - Rivera Shanghai, located in the area within the city's Inner Ring Elevated Road, offers flats at about 110,000 yuan (US$15,293) per square metre to buyers, with prices of each unit ranging from 15 million yuan to over 30 million yuan.
Flats built in areas within the inner ring road are popular with local homebuyers partly because of the government's price cap on new homes. Those new flats are often priced at a 10 to 20 per cent discount to those pre-owned units in the neighbourhood.
Buyers sign housing contracts, or sales of partially built homes, with developers, and start repaying mortgages before homes are delivered when construction is complete.
China's ailing real estate sector, along with related industries such as home appliances and construction materials, accounts for about a quarter of the country's economy.
Beijing's austerity measures to reduce developers' leverage ratios in 2020 resulted in a wave of bond and loan defaults involving developers from China Evergrande Group to Kaisa Group Holdings.
About 50 mainland developers have defaulted on some US$100 billion worth of offshore bonds over the past two years, according to a JPMorgan report in December, with 39 seeking restructuring plans with creditors for US$117 billion in stressed debt.
In August 2022, buyers of more than 320 residential projects in 100 cities collectively refused to make mortgage repayments on unfinished projects, according to real-time updates on "WeNeedHome" on GitHub, Microsoft's collaborative code-sharing platform.
Luxury homes in Shanghai have come under pressure amid worries about China's faltering economy, with some sellers cutting prices by up to 20 per cent to attract buyers, according to property agencies and consultancies.
Last November, Beijing rolled out a 16-point rescue plan for the property market, under which the banking regulators injected trillions of yuan into the property sector.
In July this year, Ni Hong, Minister of Housing and Urban-rural Development, said loosening measures, including lower mortgage financing rates and reduced down payment ratios, would be implemented to spur a market recovery while China's statistics bureau spokesman Fu Linghui said it was only a temporary setback as the industry clean-up had created turbulence. A resolution is around the corner, which could be a harbinger of long-term stability for the industry, he added.
"We have to think about the contingent impact if confidence collapses. That's the worst case," said analysts at Goldman Sachs in a note last year, highlighting that the cost for the government to eliminate completion risk was around 600 billion yuan.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.
China's property sector is in dire straits as yet another developer reportedly runs into trouble
Joseph Wilkins
Tue, August 8, 2023
A man walks outside a property agency featuring posters of the
Joseph Wilkins
Tue, August 8, 2023
A man walks outside a property agency featuring posters of the
latest high-rise apartment buildings in Hong Kong
Tyrone Siu/Reuters
The Chinese property sector has been under the gun for years.
Enormous losses, heavy debt burdens, and low demand all plague the industry, and firms keep failing.
Country Garden is the latest to wobble, as Bloomberg reports investors say they haven't received bond repayments
China's property sector continues to unravel as another developer falls behind on its debt payments, according to Bloomberg.
Country Garden Holdings – once China's largest developer by sales – failed to make coupon payments due Monday, investors who hold the firm's notes told Bloomberg.
The missed payments amount to $10.5 million of interest on a dollar bond maturing in 2026 and $12 million on another note maturing in 2030, per the report.
Country Garden is one of the few remaining private developers still standing after a years-long downturn in the country's property sector. Last month, Shimao Group defaulted on its debt, announcing losses of $6.8 billion.
While Evergrande, China's largest developer, reported a whopping $81 billion two-year loss in July – a figure almost triple the GDP of Iceland. The firm's collapse back in 2021 reverberated through global markets when it failed to repay its debt pile – and in the two years that followed, this has had dire consequences for the nation's property market.
Country Garden's woes arrive in spite of the Chinese government's pledge to rescue the embattled industry. Last week Chinese real estate stocks won a reprieve as Beijing pledged bond financing support to some of the country's largest companies – and in attendance at the meeting were executives from the firm itself.
But the long-awaited commitment by the central bank to stimulate the slumping sector may arrive too late, at least for Country Garden. The two bonds include a 30-day grace period before the missed coupon payments are classed as in default, according to bond prospectuses seen by Bloomberg.
China's property sector accounts for about a fifth of the country's overall economy. Its headwinds include heavy debt burdens, sluggish demand for new property, and potential homebuyers prioritizing saving instead. This helped to stunt second-quarter GDP growth, which came in at 6.3%, well below forecasts of up to 7.1%.
The Chinese property sector has been under the gun for years.
Enormous losses, heavy debt burdens, and low demand all plague the industry, and firms keep failing.
Country Garden is the latest to wobble, as Bloomberg reports investors say they haven't received bond repayments
China's property sector continues to unravel as another developer falls behind on its debt payments, according to Bloomberg.
Country Garden Holdings – once China's largest developer by sales – failed to make coupon payments due Monday, investors who hold the firm's notes told Bloomberg.
The missed payments amount to $10.5 million of interest on a dollar bond maturing in 2026 and $12 million on another note maturing in 2030, per the report.
Country Garden is one of the few remaining private developers still standing after a years-long downturn in the country's property sector. Last month, Shimao Group defaulted on its debt, announcing losses of $6.8 billion.
While Evergrande, China's largest developer, reported a whopping $81 billion two-year loss in July – a figure almost triple the GDP of Iceland. The firm's collapse back in 2021 reverberated through global markets when it failed to repay its debt pile – and in the two years that followed, this has had dire consequences for the nation's property market.
Country Garden's woes arrive in spite of the Chinese government's pledge to rescue the embattled industry. Last week Chinese real estate stocks won a reprieve as Beijing pledged bond financing support to some of the country's largest companies – and in attendance at the meeting were executives from the firm itself.
But the long-awaited commitment by the central bank to stimulate the slumping sector may arrive too late, at least for Country Garden. The two bonds include a 30-day grace period before the missed coupon payments are classed as in default, according to bond prospectuses seen by Bloomberg.
China's property sector accounts for about a fifth of the country's overall economy. Its headwinds include heavy debt burdens, sluggish demand for new property, and potential homebuyers prioritizing saving instead. This helped to stunt second-quarter GDP growth, which came in at 6.3%, well below forecasts of up to 7.1%.
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