China’s home foreclosures soar as nation’s debt-fuelled property bull run sputters on falling income and dim job prospects
- As many as 1.25 million homes were foreclosed in China as of September 16, according to the Taobao e-commerce platform operated by this newspaper’s owner Alibaba Group Holding
- The number of foreclosures on the platform stood at 300,000 at the end of 2019 and 180,000 in 2017
China’s property foreclosures soared this year, as deteriorating job prospects and shrinking income amid the worst economic contraction in decades combined to weigh down on borrowers’ repayment ability, putting an end to the country’s debt-fuelled real estate rally.
Nowhere is the problem more serious than in Guangzhou, the provincial capital of Guangdong and home of the autonomous driving unicorn Pony.ai and Procter & Gamble’s Greater China head office. As many as 33,000 foreclosures were reported in a city whose economy shrank 2.7 per cent last year, more than the national average of 1.6 per cent.
Lisa Fan, a Guangzhou-based lawyer who specialises in bank notices for debt-collection, has seen plenty of these cases. A woman recently approached Fan for help when her beauty salon was forced to be sold after half a year of coronavirus lockdowns emptied her clientele.
“She owed 4 million yuan (US$592,000) and needed to pay 20,000 yuan each month,” Fan said. “However, she had no income in the first half due to the social-distancing measures to contain the coronavirus outbreak.”
Property foreclosures create a downward spiral effect, as homes on record as collateral for loans tend to be avoided in the second-hand market for fear of containing hidden liens, until they can be proven to be fully discharged.
