Recently, a number of unfinished property owners in the mainland have initiated actions to refuse to repay their loans. It is said that a total of 35 unfinished project owners in at least 22 cities decided to stop repaying their mortgage loans at the risk of affecting their personal credit records. The incident has attracted the attention of the official media, and even big banks are worried that the relevant actions will have spillover effects, which will affect the recovery of domestic property sales. Nomura even estimates that the rebound of the sector since June may have ended.
Official media worry regarding financial stability
The official mainland media “Securities Times” commented on the front page yesterday that the trend of owners of unfinished properties collectively stopping loan repayments is showing signs of spreading, which may be detrimental to the property market and property sales. When bad debts increase, it is also detrimental to financial stability. Comments believe that local governments should study how to revitalize the unfinished buildings, “play the dead game, recover the transferred funds, or introduce powerful real estate companies, and give priority to guarantee delivery.”
Nomura’s report stated that the relevant owners believed that the bank’s loan to the inner room was not well-controlled, and that the lavish loan of the inner room made the project ultimately lack of funds to complete, so they threatened to stop the loan repayment until the bank and the real estate company took action to revive the project. The bank also pointed out that it does not see that there will be major factors that support the stock price in the first half of the real estate company’s performance, but may lower the annual profit target, and even provide support for tenants, so it is estimated that the industry’s rebound since June has ended. China Resources Land (1109) is the only Chinese property stock that the bank is optimistic regarding in the long term, with a “Buy” rating.
Xuhui fell 19% on the 3rd day of Country Garden
Mainland real estate stocks generally fell significantly yesterday. CIFI Holdings (884) plunged 13.2%, and has plunged 34.8% this month, and rose 20.1% in June, which means that it has fallen and rebounded from the previous month. Country Garden (2007) also tumbled 8.5%, being the worst performing blue chip. It fell 18.6% for 3 consecutive days and lost 24.5% this month. In addition, Country Garden Services (6098) fell another 6.8% yesterday, Hopson Development (754) slumped 6.5%, Ronshine China (3301) and New Town Development (1030) also fell by half.
Originally published on AM730 https://www.am730.com.hk/Real Estate/The owner of the unfinished building refuses to repay the loan-Nomura expects the internal housing rebound to end/328538
