Shares of struggling China property developers declined further on Friday as homebuyers’ refusal to repay loans on partly built apartments outweighed local government assurances to get help deliver property projects on time.
The regulatory comment came as threats to withhold payments for stalled property projects have proliferated in official and social media in recent weeks.
That has deepened investor concerns about China’s property sector, which accounts for a quarter of the world’s second-biggest economy and has been a pillar of growth over the last two decades.
The Hang Seng Property Index, tracking a group of mainland-based property developers, fell 1.3% in the morning trade on Friday, dragging the Hong Kong benchmark index down 0.8%.
Among those China shares hardest hit, shares in Longfor Group Holdings tumbled 6.9%, while Country Garden Holdings Ltd fell 3.6%.
Nascent Recovery Under Threat
The drop came despite Chinese state media carrying reports late on Thursday citing an unnamed China Banking and Insurance Regulatory Commission (CBIRC) official saying the regulator will strengthen coordination with housing and construction authorities, and China’s central bank, to back local administrations in “guaranteeing the delivery of homes”.
A mortgage payment strike would threaten to kill a nascent recovery in China’s capital-starved property sector and hit banks with hefty writedowns, analysts have warned.
“Things will get worse before they get better,” Xiaoxi Zhang, China finance analyst of Chinese research group Gavekal Dragonomics, predicted.
“China has been determined to curb the leverage (taken on) by property developers and the government will still try to refrain from providing liquidity to them in a big scale. It will take time for some more targeted measures to be issued,” she said.
- Reuters with additional editing by Sean O’Meara
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