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| Construction halts may affect 4.7 trillion-yuan worth of homes in China, and up to 1.4 trillion yuan, or about 1.3 percent of the nation’s gross domestic product, may be needed to complete them, Bloomberg Intelligence analyst Kristy Hung estimated. China's struggling property developers saw shares rally following a cut in lending rates by the central bank. (File photo by=AFP/Noel Celis) |
[Asia News = Reporter Reakkana] China’s deepening property bust is sending shock waves through the nation’s 400-million-strong middle class, upending the belief that real estate is a surefire way to build wealth, Bloomberg reported.
Now, as property developments stall across the country and house prices fall, many Chinese homeowners are slashing spending, postponing marriage and other life decisions, and, in a growing number of cases, withholding mortgage payments on unfinished homes. Peter, for one, has given up on starting his own business and a new car after China Aoyuan Group stop the construction of his 2-million-yuan (US$300,000) home in Zhengzhou, Henan. He's now saddled with a mortgage of 90 percent.
Peter is one of the hundreds of thousands of homebuyers in more than 90 cities across China to boycott a combined 2 trillion yuan in mortgages after firms such as Aoyuan and China Evergrande Group halted projects. A growing number of the nation’s middle class, which has an estimated 70 percent of its collective wealth tied up in housing, are joining the wildcat actions to refuse payment, posing a threat to the economy and social stability. Chinese authorities are now rushing to defuse the situation, with some proposing a grace period on loan payments and for local governments and banks to step in and rescue the developments.
