China has been trimming interest rates recently – in contrast to other major economies – as it tries to stem the economic effects of its zero-COVID policy and address a growing property crisis. The country’s traditionally strong housing market has been affected by a funding crisis that has seen development paused and led to buyers refusing to pay their mortgages.
The trigger for the buyers’ strikes is a widespread belief among these protesters that the funds homeowners have paid in advance to the builders of these property developments have been misused. Indeed, a commonly observed pattern in China’s property development industry is for developers to purchase lands, pledge them to banks to get loans, start projects, begin the presale process with buyers and then use these funds to purchase lands for other projects.
The weak market has substantially reduced the funding available to developers, as figure 2 below shows. This is the root cause of the current situation in which developers have paused building, causing homeowners to strike by refusing to pay their mortgages. This is not alarmism: Chinese developers generally borrow a lot of money to fund ongoing construction. While the industry average debt-to-asset ratio is around 65%, some of the leading companies are even more indebted .
Business Business Latest News, Business Business Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: abcnews - 🏆 5. / 83 Read more »
Source: FinancialReview - 🏆 2. / 90 Read more »