The Bank of China Insurance Regulatory Commission (CBIRC) reaffirmed on Thursday that it will provide “active credit support” to help real estate developers complete delayed or stagnant projects as soon as possible.
He also urged banks to offer more mortgages to qualified buyers to support demand and support the housing market.
Mortgage lending increased after the People’s Bank of China cut homebuyers’ mortgage rates by two-tenth percentage points for the first time in May. Almost all mortgages, 90%, were for first-time homebuyers.
“The current credit pace for mortgages has reached the fastest pace since 2019,” CBIRC official Liu Zhongrui said at a press conference in Beijing on Thursday.
Last month, bank-issued new developer loans also reached 52.2 billion yuan ($ 7.7 billion), Liu added.
The pledge is the latest in a series of moves by Chinese authorities to quell the rebellion of homebuyers nationwide. An increasing number of dissatisfied buyers have refused to pay mortgages for unfinished projects, exacerbating the country’s housing problems and raising concerns about systematic financial crises and social unrest.
This move shows how the liquidity crisis facing developers is spreading to other aspects of society.
The problem began in 2020, when Beijing began cracking down on excessive developer borrowing to curb high debt burdens and runaway real estate prices. The crisis intensified last year when Evergrande, the country’s most debt-rich developer, was in a hurry to raise money to repay lenders. As the real estate sector cools, some large companies are seeking protection from creditors. Many real estate projects across the country have been postponed or suspended due to developers running out of cash.
Many homebuyers have begun mortgage repayments before they own new real estate, raising public anger at stagnant projects. In China, real estate companies can sell their homes before they are completed and use the money to raise construction funds. This is the most common way to sell a home in the industry.
Analysts say a boycott of mortgages could lead to an increase in bad debts at banks, further damaging confidence in the real estate sector. As sales continue to decline, developers can face a larger cash crisis, which can lead to more defaults and project delays, creating a vicious circle in the market. The real estate crisis will also put strong pressure on the economy and financial system. Real estate and related industries account for up to 30% of China’s GDP.
Earlier this week, Zhengzhou, central China, set up a bailout fund to help real estate developers deal with unfinished projects. This is one of the first remedies for local governments to deal with mortgage boycotts.
The fund will be jointly established by Zhengzhou-based Henan Asset Management and Zhengzhou Real Estate Group, according to a statement from an asset management company released on Tuesday. Zhengzhou is the capital of central Henan and is currently the center of the national mortgage boycott.
Both companies are backed by the state’s local government.
The fund will be used to “revive struggling real estate projects and bail out struggling developers,” without revealing the size of the fund, the statement said.