In China, real estate firms are allowed to sell homes before completion, and clients must start paying off mortgages before they take ownership of new properties. These funds are used by developers to finance construction.
Home prices are also falling, confusing some buyers: they may find themselves locked into a property now worth less than they agreed to pay, leaving them worried about paying their mortgage payments.
Buyers in 18 provinces and 47 cities had stopped payments by last Wednesday, according to multiple state media reports and data compiled by Shanghai-based research firm China Real Estate Information Corporation.
Developers rallied across the board in Monday’s news. Guangzhou R&F Properties rose 9%. Country Garden rose 6%. Longfor Properties jumped 4.1%. Vanke Real Estate also gained 2.9%.
Shares in the region also rose in part on hopes for more stimulus from China. The Hang Seng index rose 2.7% and the Shanghai Composite rose 1.6%.
But analysts advise caution.
“With this movement [by the regulator] reassuringly, the issue is very complex and it is unlikely that CBIRC will be able to handle it on its own,” Nomura analysts said on Monday.
Anger over bank runs
Protests have erupted in central China in recent weeks as thousands of depositors were unable to access their savings at several rural banks in the region.
The regulator added that it had already allowed local governments to issue more than $15 billion in special bonds to replenish the capital of small banks this year. He will work with the Treasury Department to approve additional $30 billion in bonds by the end of August.
The move comes days after Chinese authorities said they would begin refunding some bank customers whose accounts had been frozen for months.
Earlier this month, protesters began a massive demonstration in the city of Zhengzhou in Henan province, which was violently repressed by the authorities. It was the biggest protest ever by savers who have been fighting for months to get their frozen savings back.
Policy makers in the world’s second-largest economy face growing challenges to maintain robust growth as the country grapples with a sharp slowdown in activity due to Beijing’s tough anti-coronavirus policies, a heavy regulatory crackdown on the private sector and a real estate crisis that is fueling a rise in lost debts in banks and the growth of social protests.