China's mortgage boycott quietly regroups as construction idles

The threat of more mortgage boycott comes as China prepares to hold the Communist Party congress next month. PHOTO: REUTERS

BEIJING - Two months since many Chinese home buyers stopped repaying mortgages to protest stalled construction on their properties, a lack of progress at more sites now threatens to intensify the boycott, despite assurances from the authorities.

The mortgage protest was a rare act of public disobedience in China, pushed via social media in late June and forcing regulators to scramble to offer home buyers loan payment holidays for up to six months and pledges to expedite construction.

But with no sign of construction picking up at many projects and no clear guidance from the local authorities, more home buyers have told Reuters that they plan to join others who have stopped paying mortgages.

Mr Wang Wending in the central city of Zhengzhou said he was allowed to delay mortgage payments on his apartment for six months in late July.

However, he would have to pay the due instalments in one go when the moratorium ends, regardless of the state of construction, which was yet to commence.

"What will we do if construction still does not resume after six months? We will directly stop all payments," he said.

Home buyers in at least 100 cities have threatened to halt mortgage payments since late June as developers stopped building projects due to tight funding and strict Covid-19 curbs.

The threat of more mortgage boycott comes as China prepares to hold the Communist Party congress next month, with efforts to revive an economy plagued by the property crisis in focus.

While censorship on social media has blocked messages and wiped videos of the protests, largely taking them out of public spotlight, the boycott has nonetheless expanded.

A widely monitored list on the GitHub open source site entitled "We Need Home" showed the number of projects across China whose buyers have joined the boycott at 342 on Sept 16, up from 319 in late July.

The authorities in Zhengzhou, the epicentre of the protest, have vowed to start building all stalled housing projects by Oct 6, people with knowledge of the matter told Reuters.

The city will use special loans and urge developers to return misappropriated funds and property firms to file for bankruptcy, the sources said.

'Appease home owners'

The mortgage boycott has added to worries about a prolonged slump in China's property market, which has lurched from crisis to crisis since mid-2020 after regulators stepped in to reduce leverage.

Beijing has unveiled measures including lowering borrowing costs and assisting local governments to set up bailout funds to prop up the property market.

Although that has assured some home buyers, others say they have been forced to stay silent amid a crackdown on dissent.

In Zhengzhou, 30-year-old Ashley, who gave only her first name, said that while construction resumed at her apartment in the second quarter, only a handful of people work at the site to, what she believes, "appease home owners".

Ashley told Reuters she and other home owners of the development were warned against travelling to Beijing to protest after the Zhengzhou government repeatedly cancelled meetings with home buyers.

"I received a call from the police this week. They asked me not to get around them to protest to the higher authorities," she said. "They said that if anything, I should talk to the local government first and if they cannot solve the issue, they can forward the message for us."

Ashley showed Reuters a phone log indicating that police had called her 15 times in one day earlier this month.

Bailout

About 2.3 trillion yuan ($464 billion) worth of loans is at stake if all unfinished projects ended up in mortgage boycotts, representing 6 per cent of total mortgages, Natixis said in a report last month.

Beijing has set up a bailout fund worth up to US$44 billion (S$62 billion) and US$29 billion in special loans for unfinished projects to restore confidence, sources said.

Sources at property developers and banks, however, said it could take time for those funds to make a difference.

"There won't be money for everyone," said a senior executive at a Shanghai-based developer.

A home buyer in China Evergrande Group's project in Hefei said he was due to receive his apartment in 2020, but construction has stalled for the last four years.

Buyers in that project started protesting last year and joined the wider boycott in June, said the home buyer, who declined to be named.

Evergrande said company chairman Hui Ka Yan vowed in an internal meeting last week to return all construction to normal by the end of September.

Out of Evergrande's 706 projects, 38 have not resumed construction, while 62 were only now restarting.

"We will not repay mortgages again if we don't see any material results," the home buyer said, adding that partial construction resumed in late August with only around 20 workers.

"We will continue to protest - we will go to Beijing." REUTERS

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