: China’s troubled property sector suffered another blow this month when frustrated homebuyers stopped making mortgage payments on units in unfinished projects.
The bonanza was fuelled by easy access to loans, with banks willing to lend as much as possible to both developers and buyers. It launched a crackdown last year, with the central bank capping the proportion of outstanding property loans to total lending by banks to try to limit the threat to the entire financial system.A wave of defaults ensued, most notably by China’s biggest developer, Evergrande, which is drowning in liabilities of more than $300 billion.
Many of the unfinished projects were concentrated in Henan province, where mass protests in response to rural bank fraud broke out and were suppressed. “Should defaults escalate, there could be broad and serious economic and social implications,“ Fitch Ratings wrote in a note on Monday. A major bailout may also encourage developers and home buyers to continue with risky decisions as they would see the government and banks taking on responsibility.
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