Borrowing money

Homebuyers in China are running out of patience with developers

Recently married and with his first child on the way, auto worker Wang (王) wanted to move into the apartment he bought in Wuhan three years ago, but those hopes were dashed by the housing crisis in China.

Struggling with nearly US$300,000 in debt and his unit far from complete, the 34-year-old decided he had had enough and stopped making mortgage payments.

He is one of many homebuyers in dozens of Chinese cities who have boycotted payments for fear their properties will not be completed by cash-strapped and indebted developers.

Photo: AFP

“They said construction would resume soon,” Wang said, giving only his last name. “But no worker showed up.”

Beijing-based Wang planned to start a family after buying the house.

“Buying this house was not easy for us. It all came from my savings,” Wang said. “Now there is no house, and we still owe 2 million yuan [US$296,608] in mortgage payments.

After years of explosive growth fueled by easy access to loans, Chinese authorities have launched a crackdown on over-indebtedness in 2020.

This has narrowed financing options for real estate giants such as Evergrande as they struggle to make repayments and restructure mountains of debt.

Now they face mortgage boycotts and government pressure to deliver pre-sold homes.

In Wuhan, the capital of Hubei province, buyers such as Wang said they had received several notices of postponement of their apartments from developer Myhome Real Estate, months after the promised delivery date at the end of last year.

The builder said in a notice this week that it had successfully released frozen funds, adding that it expects to complete the Wuhan project by the end of this year.

Wang said he stopped refunds this month and complaining to city officials made no difference.

“There is no hope in life, continuing with payouts like this,” he said.

The “crisis of confidence” in China’s housing market points to structural flaws, wrote Andrew Batson, director of China research at Gavekal Dragonomics, in a recent report.

Due to their heavy reliance on selling apartments in advance, developers pursued business models that put buyers at risk of not getting their homes, he said.

As companies in financial difficulty halt construction of projects, “those risks have materialized significantly”, he added.

The crisis has left home buyers in limbo.

“I thought it would never happen,” said a Wuhan homebuyer surnamed Hu (胡) of his unfinished home.

The 25-year-old said his family took out loans to help with the down payment on a three-room flat in 2018.

At that time, Wuhan encouraged university graduates such as Hu to obtain household records in the city, he said.

Known as hukou (戶口), these very important government records allow access to health care and schools.

“Everyone was buying property back then…people were fighting,” he said.

Another young homebuyer, Xue (薛), said almost all of his salary is now spent on rent and mortgage payments.

“I don’t want to pay anymore,” said the 24-year-old. “Our hearts are cold.”

“It’s not that we don’t respect the law or the contracts, but this situation puts too much pressure on us,” he added.

Xue’s family staked 800,000 yuan for the apartment, while he took out a loan of 600,000 yuan which he has been repaying for two years.

Wuhan buyers said there had been protests over unfinished pre-sold homes in the city.

Homebuyers in about 100 cities – involving more than 300 housing projects – boycotted mortgage payments, according to a crowdsourced document titled “WeNeedHome”.

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