Patience of Chinese homebuyers wears thin amid real estate slump

Beijing [China], July 20 : Amid reports of homebuyers halting mortgage payments that rocked bank stocks in China, analysts said that the real estate market in the second largest economy needs a boost in confidence.
This comes as rising numbers of homebuyers are halting mortgage payments, prompting many Chinese banks to announce their low exposure to such loans.
"It is critical for policymakers to restore confidence in the market quickly and to circuit-break a potential negative feedback loop," CNBC quoted Goldman Sachs chief China economist Hui Shan as saying in a report.
"If left on its own, more homebuyers may stop paying mortgages, [further] straining property developers' cash flows, which in turn could lead to more construction delays and project halts," the Goldman report said.
According to analysts, uncertainty "dampens households' desire to buy homes from these developers who arguably need the sales the most."
On Saturday, state media outlet Global Times reported that multiple real estate projects in China have resumed construction, after some disgruntled homebuyers denied to pay their mortgages for unfinished or stalled housing projects as cash-strapped property developers run out of cash.
Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times that it is good news showing that property development companies are actively attempting to resume housing construction.
Yan said local governments and developers cooperating to solve the funding problem could offer examples for other similar delayed housing projects to restart.
She also noted that it is of great significance for the related parties to sit down and negotiate and come up with feasible scenarios to resume project construction.
Song Ding, a research fellow at the Shenzhen-based China Development Institute, said that whether the stalled projects resumption could be sustained remains to be seen given the liquidity pressure facing the cash-strapped developers.
With different parties joining hands to solve the funding problem, it is hoped that the developers could take the opportunity to find a way to restart the stalled housing projects, Song was quoted as saying by GT.
In the long run, the pre-sale mode of properties, under which homebuyers pay mortgages before obtaining finished housing, should be reformed to offer more failsafe protections for homebuyers, Song added.