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China

As China's Economy Stumbles, Homeowners Boycott Mortgage Payments (nytimes.com) 138

Posted by msmash from the closer-look dept.
For decades, buying property was considered a safe investment in China. Now, instead of building a foundation of wealth for the country's middle class, real estate has become a source of discontent and anger. From a report: In more than 100 cities across China, hundreds of thousands of Chinese homeowners are banding together and refusing to repay loans on unfinished properties, one of the most widespread acts of public defiance in a country where even minor protests are quelled. The boycotts are part of the fallout from a worsening Chinese economy, slowed by Covid lockdowns, travel restrictions and wavering confidence in the government. The country's economy is on a path for its slowest growth in decades. Its factories are selling less to the world, and its consumers are spending less at home. On Monday, the government said youth unemployment had reached a record high.

Compounding these financial setbacks are the troubles of a particularly vulnerable sector: real estate. "Life is extremely difficult, and we can no longer afford the monthly mortgage," homeowners in China's central Hunan Province wrote in a letter to local officials in July. "We have to take risks out of desperation and follow the path of a mortgage strike." The mortgage rebellions have roiled a property market facing the fallout from a decades-long housing bubble. It has also created unwanted complication for President Xi Jinping, who is expected to coast to a third term as party leader later this year on a message of social stability and continued prosperity in China.

So far, the government has scrambled to limit the attention garnered by the boycotts. After an initial flurry of mortgage strike notices went viral on social media, the government's internet censors kicked into action. But the influence of the strikes has already begun to spread. The number of properties where collectives of homeowners have started or threatened to boycott has reached 326 nationwide, according to a crowdsourced list titled "WeNeedHome" on GitHub, an online repository. ANZ Research estimates that the boycotts could affect about $222 billion of home loans sitting on bank balance sheets, or roughly 4 percent of outstanding mortgages.
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As China's Economy Stumbles, Homeowners Boycott Mortgage Payments More

As China's Economy Stumbles, Homeowners Boycott Mortgage Payments

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  • They'll actually throw you in prison for that. It only takes a few to make an example in China.

    • Re:Good luck with that! (Score:5, Insightful)

      by MightyMartian ( 840721 ) on Wednesday August 17, 2022 @11:19AM (#62797185) Journal

      Even a dictatorship will have a hard time against large scale disobedience. Dictatorships aren't immune to political and social pressures, and they can only shoot so many people. That's what made Julius Caesar and Franco probably the smartest dictators in history. They certainly had the power of the state at their disposal to impose their will, but it's always better to have the majority of the population happy that your the top banana as opposed to terrorizing them into obedience.

      • Maybe, but they can suppress the large scale disobedience from happening. See North Korea. The only thing that can foil North Korea's dictatorship would be fully externally coordinated/sponsored assassinations, induced mistrust, or something like that.

      • The balance these autocrats need to strike is, more people should believe they are better off with their current situation than what the future might bring.

        One way is to make their current situation better, but that is not really appealing to the autocrats.

        Another way is to FUD and make future scary, what the wrath of dictator would do to them, etc to prefer inaction to open disobedience

        Another way they do is to create a hierarchy of autocrats, fiefs and vassals, who owe their power to the one above and

        • Franco was kind of a genius in this way. He was always hard to pin down, starting out pretty much as a typical 1930s Fascist, but unlike other Fascist leaders, he went out of his way to make his regime a friend of the Spanish Church (both Mussolini and Hitler were fundamentally critical of clerics), and in doing so made elements of Spanish conservatism feel pretty safe. He made a lot of economic reforms which did a helluva lot to modernize the Spanish economy and get it out of the century long malaise that

          • Re: (Score:2)

            by znrt ( 2424692 )

            franco had no ideology, he was the perfect pragmatist/opportunist. this is why i frown a bit when he's called a fascist. as much as he was a bloody psychopath, he never was an actual fascist. one of my favorite quotes from him is: "do like me, just don't get yourself into politics".

            he managed to outsmart his (ideologized) competitors (mostly getting them into harm's way) during the civil war already, and then simply modulated message and policy as to perpetuate his power. first thing he did was neutralizing

        • Pragmatism is the key. Mao was a damned good revolutionary, perhaps the greatest of them all, but he was an utter fantasist when it came to economics, as the famine brought on by the Great Leap Forward demonstrated. The Cultural Revolution he unleashed created political, social and economic chaos, though it did sideline his chief competitors, in particular Deng Xiaoping, who was all but thrown out the door during the Cultural Revolution. Deng Xiaoping, on the other hand, was the prototypical autocratic tech

        • The balance these autocrats need to strike is, more people should believe they are better off with their current situation than what the future might bring.

          True. That works for all governments everywhere.

          One way is to make their current situation better,

          Which China has been doing very successfully for the past 30 years. It really is unprecedented.

          Another way is to FUD and make future scary,

          Which is the American / Western style version.
          Vote for my team, because the other team is worse.

    • Re: (Score:2, Informative)

      by Virtucon ( 127420 )

      taking productive adults and throwing them into prison wouldn't solve the issue. It would make a point to the rest of them but making Christmas lights isn't as productive as working in other industries.

      The issues are longer-term and have been brewing for a long time. Many projects being unfinished yet sold and mortgaged could lead to more developers failing and likewise banks who've funded the loans. The Chinese gov't has no alternative but to bailout the banks and that will feed into the current economic t

  • They should rest easy (Score:3, Insightful)

    by systemd-anonymousd ( 6652324 ) on Wednesday August 17, 2022 @11:05AM (#62797133)

    I don't know why they're afraid to protest in that country. Each time there's a protest the CPP definitely doesn't respond. Just like in Tienanmen square. The CCP did nothing. Absolutely nothing. Definitely didn't do a single thing. Proof that you can protest all you want!

    • Re:They should rest easy (Score:5, Informative)

      by Errol backfiring ( 1280012 ) on Wednesday August 17, 2022 @11:21AM (#62797195) Journal
      Oh, people try, but when you are marked "protester" by the police, you cannot even get a ticket for public transport anymore. Protesters are seen as terrorists. (See ID cards in China: your worst nightmare [media.ccc.de])

    • Re:They should rest easy (Score:4, Insightful)

      by fuzzyfuzzyfungus ( 1223518 ) on Wednesday August 17, 2022 @11:23AM (#62797211) Journal
      Whoever the feds decide to crack down on should prepare to get squished, possibly literally; but it's not yet entirely clear which side they'll come down on on that question.

      In Xi's perfect world I'm sure they'd have both solvent property developers and no mass discontent among mortgage holders who can no longer afford payments on property that likely isn't worth what they paid for it; but if they have to pick one of the two it's not immediately obvious that they'd back a relatively small group of lenders and take on the difficult task of quashing the much larger group of borrowers; rather than playing for stability by forcing whatever haircut is necessary on the lenders to, on average, keep people in their houses and encourage them not to get all worked up about massive systemic weaknesses.

      The CCP certainly won't hesitate to come down like a ton of bricks, whether the law allows or whether it needs to be changed or ignored; but, especially now that begging for foreign investment is no longer priority #1, there's a very real possibility that they'll choose who gets to volunteer to sacrifice for the good of the nation based on concerns about stability, rather than a reflexive worship of rich people.

    • Re:They should rest easy (Score:5, Interesting)

      by hdyoung ( 5182939 ) on Wednesday August 17, 2022 @12:23PM (#62797487)
      Most oppressive governments have refined their tactics in the last two decades. Most dictators and oligarchies don't mow down protesters anymore - they deal with it more quietly. They suppress information on the internet and monitor dissidents. Anyone making trouble isn't immediately hauled away to be tortured. That attracts too much attention. Instead, any troublemaker finds their social credit score drop. The can't borrow money. They can't fly or take the bus. 4 weeks later, they lose their job and their apartment lease gets terminated. If that doesn't shut them up, 2 months later a bunch of their relatives also lose their jobs. If that doesn't work, they get quietly taken in for "reeducation" and show up 6 months later and apologize to society for having been a bad citizen. The most vocal people are encouraged to emigrate and exit the society.

      It's better in that it means less "driving the tanks over protesters" but overall the long-term result for the society in question is largely the same. Most independent-minded and ambitious people are either suppressed and broken, or leave for the more open societies. The population that's left is dumber, sicker, weaker and less capable of action. This translates into less economic productivity.

      Economists have learned that, in the long run, productivity-per-person drives pretty nearly everything you can possibly measure about a society. This is why I have no worries about China taking over the world. At the population level, their workers do about 1/3-1/4 the productive work of a western worker. I suspect that Russia is even worse. Developing countries that like the China model should take careful note of this. Western democracy is annoying, but the other government types are measurably worse in nearly every way.
      • Good analysis.

      • Economists have learned that, in the long run, productivity-per-person drives pretty nearly everything you can possibly measure about a society.

        Interesting thought

      • Western democracy is annoying

        This could perhaps be generalized as, "other people are annoying." Might not be a way to get around that.

  • If the locked down Chinese can do that, I'm sure there will be no problem doing that here in the free U.S. of A.!

    Boycott coming. Eat that Chase!

    --
    Boycott is a perfectly legitimate form of democratic protest. - J. Jayalalithaa

    • Re:You Can Do That? (Score:5, Informative)

      by nealric ( 3647765 ) on Wednesday August 17, 2022 @11:22AM (#62797203)

      The Chinese situation is a bit different than the U.S. In China, it is common to have to pay up-front for properties that are still in development. You are paying a mortgage on an apartment that does not yet exist. Part of the reason for the boycotts is that some of the developers have taken the money and then paused development, and are on shaky ground such that it's not clear there's any likelihood of the buildings ever being built. They aren't rebelling against the banks for writing shady loans, they are rebelling against shady property developers who've taken their money and delivered nothing.

      The government is worried about this because boycotts could send the house of cards tumbling down that is the finances of the developers. They were already operating like Ponzi schemes, where the money to build Building A (which had already been pre-sold) was financed by getting people to buy into Building B, which will in-turn be financed by selling a future Building C. Everything goes pear shaped when nobody wants to buy Building B and C and the developer can't afford to complete Building A. The loss of confidence means that people are now becoming reluctant to pre-buy anymore. If the building A buyers refuse to pay their mortgages, they are are at risk of complete collapse.

      • it is common to have to pay up-front for properties that are still in development.

        That is common in the US, too.

        • Re: You Can Do That? (Score:4, Informative)

          by NagrothAgain ( 4130865 ) on Wednesday August 17, 2022 @12:53PM (#62797631)
          It's not uncommon to buy before it's built, but normally you put some money "down" ahead of time and don't owe anything or make finance payments on the rest until it's delivered. I think the issue in China is that they're getting a "regular" mortgage from a bank against property which doesn't exist yet, which isn't something lenders can do in the US. So in the US when a builder implodes, at worst you're out the money you paid but you don't have any debt. But in China, you still owe the bank and that's basically what people are refusing to pay.
        • There is a difference between a one-time deposit to reserve an unfinished house, and an ongoing mortgage payment for a property that doesn't (and might not ever) exist as a finished house.

        • Re: (Score:1)

          by vivian ( 156520 )

          The difference is, the developer has to actually finish the project in the US. in China, there are so many buildings that have been built as only shells with no plumbing, wiring or fit-out and no intention of the developer to complete them - which was sort of "fine" when everyone was treating these investment apartments like supersized tulip bulbs, but now some people actually want to live in them or are finding they cant move them on to the next investor (and I use the term loosely) , they are justifiably

    • You can do that anywhere. The difference is that we are talking about mortgages on unfinished houses. I'm not sure of the USA, but I've never lived in a country where you start paying for a mortgage on an unfinished house. Normally you put a down payment down or get finance approval via a letter of intent and the mortgage / repayment terms start when the property is available.

      The exception being when you buy land and construction separately, but the way I see it these people are buying homes in apartments o

      • There are pockets in West such things exist.

        I remember reading about people buying properties from people with the clause the seller gets to live in the property till they die, in Paris. So some people pay mortgage on property they cant occupy. But sooner or later the seller will die and you will get the property, if you out live them. The oldest French woman apparently out lived two buyers of her apartment.

        • I remember reading about people buying properties from people with the clause the seller gets to live in the property till they die

          This sounds like a good premise for the plot of a murder mystery novel.

        • So some people pay mortgage on property they cant occupy.

          Which has nothing to do with the Chinese situation. You are talking about a finished house that IS being lived in (just not by you), vs. a house that doesn't yet exist, so NOBODY can live in it.

      • Re: (Score:3)

        by spitzak ( 4019 )

        Even construction in the US is paid with installments as the work is going on, you don't pay the builder all the money at the start.

    • Situation is basically different. These people are stopping payments on houses *that haven't actually been built yet.* I won't say that buying an unfinished house never happens in the US, but paying a mortgage for years on a house that doesn't yet exist is something you don't see much of over here. Don't pay the mortgage on a house here, it gets repossessed and you're evicted. Tough to do that with a house that doesn't exist.

      • Don't pay the mortgage on a house here, it gets repossessed and you're evicted. Tough to do that with a house that doesn't exist.

        On the contrary. It's much easier to evict someone who hasn't moved in yet.
        It's all just paperwork. No locks to change. No stuff to throw out into the street. You don't even need to repair all the vandalism.

  • Real estate bubbles can pop? What commie plot is that?

    • Re: (Score:1)

      by Tablizer ( 95088 )

      Our political categories & vocab need an update. In the modern world, the degree of capitalism and the degree of democracy (vs. dictatorship) have grown more orthogonal. Many dictators have learned to embrace a degree of capitalism over time.

  • Housing shouldn't be an investment at all (Score:4, Interesting)

    by Ichijo ( 607641 ) on Wednesday August 17, 2022 @11:43AM (#62797303) Journal

    ...but rather a storage of wealth (equity). Housing cannot be both affordable and a good investment [archive.org] because when it's a good investment, it quickly becomes unaffordable.

    Right now, we should be building like crazy to flood the market with housing and keep home prices from rising faster than inflation.

    • You are definitely correct, we should be doing that. But, as a homeowner, would you approve new housing in your area while believing it will suppress the value of your own house and potentially bring strangers to your neighborhood? Most people would say no -- in spite of the fact that the reason they themselves have a home is someone else at some point allowed their home to be built. That's why homes are unaffordable for many.

      • Re: (Score:2)

        by Ichijo ( 607641 )

        But, as a homeowner, would you approve new housing in your area while believing it will suppress the value of your own house and potentially bring strangers to your neighborhood?

        Of course. I'm not a xenophobe, and upzoning the land that my house sits on makes the land more valuable to developers. The increase in land values offsets the lowered value of the building itself.

        What I'd really like within a short walk from my house is a small store with some necessities, and popsicles [archive.ph]. But right now that's illeg

      • Re: (Score:3)

        by dskoll ( 99328 )

        As a homeowner, I would be completely fine with my house declining in value if it meant my kids and others could have a shot at affordable housing. My house is my home, not an investment, and I don't care what its value does in the short- to medium-term because I have no plans to sell it until I can no longer manage the steps.

        However, you are right: Most homeowners become selfish NIMBY pricks once meaningful steps are taken towards making housing affordable, because affordable housing necessarily means low

        • I think part of the problem is the perception that affordable housing lowers property values when at least locally in Scottsdale I've seen the opposite as affordable housing comes in the form of apartments while my actual house is now worth three times what I paid for it almost a decade ago.

      • But, as a homeowner, would you approve new housing in your area while believing it will suppress the value of your own house and potentially bring strangers to your neighborhood?

        Having personally seen the consequences here in California of not doing that I absolutely would and I currently vote for city council members with that in mind. Our state's problems arent as bad as the partisan obsessed make them out to be but this state has far more problems then it did a couple of decades ago and it all has to do with the housing shortage. There's a lot more that matters in this world then the risk of few percentage points off the value of ones home or (heaven forbid) "strangers"!

        This is

    • Anything that can store wealth is unavoidably an investment. As much as you might try to ensure the wealth put in now equals the wealth extracted later, it's impossible to do perfectly. The inherent value of the home changes with its physical upkeep, the local job market and amenities, even climate change...

      Cuba really made an effort at housing equality, and it's worth looking into [brookings.edu]

      "Housing was one of the first public policy issues addressed by Cubaâ(TM)s socialist government. In revolutionary lor

    • Funny that! The Beijing authorities agree with you, from a decade ago:

      Beijing Municipal Government Wednesday issued new rules limiting the number of homes each family can buy as the government steps up efforts to cool the property market. The new rules ban Beijing families who own two or more apartments and non-Beijing registered families who own one or more apartment from buying more homes.

      https://www.chinadaily.com.cn/... [chinadaily.com.cn]

    • I'm really tired of this 'Keep building more housing to make it more affordable!' trope. It has never worked, anywhere. By this logic, Manhattan and San Francisco (the two highest density cities) should be the most affordable places to live in the US. Yet they are two of the most expensive.

      • Re: (Score:2)

        by Ichijo ( 607641 )

        By this logic, Manhattan and San Francisco (the two highest density cities) should be the most affordable places to live in the US.

        San Francisco won't allow new housing.

        • ...because they have already filled in with as much housing as you can squeeze onto a peninsula (well, short of razing existing homes/parks and building hi-rises). That's my point: They built as dense as they could, and it had zero effect on affordability.

      • Re: (Score:2)

        by spitzak ( 4019 )

        Besides the easily-refuted bonehead statement you made about San Francisco, Manhattan is actually pretty low on *housing* density.

        • Excuse my language, but are you fucking kidding me with this? Manhattan has 69k/square mile, which is the more than double NYC as a whole, which is then the highest density city in the US. I'd like to hear your definition of 'low housing density'...

        • Besides the easily-refuted bonehead statement you made about San Francisco...

          ...and yet despite it being 'easily-refuted', you were either too lazy or stupid to refute it.

      • You're only looking at half the equation. It doesn't matter how much housing is in NYC or SF, what matters is the ratio of supply to demand. Demand for housing in either city far exceeds the supply, so the cost is exceedingly high.
        • You are completely missing my point. There is NEVER going to be enough supply to offset demand, because no matter how much they increase the supply, demand always outstrips the supply. My original point is the whole dogma of "Build more housing to make X place affordable" has always been proven wrong time and time again. It has never worked.

    • Re: (Score:2)

      by tlhIngan ( 30335 )

      And that's what happened in China. They built like crazy because everyone wanted to be a landlord, so there was tons of money around.

      There are entire cities in China meant to hold 3-5 million people, whose current population is around 100,000. Plazas and other attractions sit around disused and eerily empty because they built them, but the population did not come, and there aren't even enough people to keep them open or maintained.

      China's got a real estate problem - they boomed too much, over built and now

      • There are entire cities in China meant to hold 3-5 million people, whose current population is around 100,000.

        Bullshit.
        Name one.

  • China's real estate market is like California's on steroids. Homes aren't for living in either California or China; they are investment properties. Except in China, the investment market has gotten fucked that they don't even finish building the properties first before turning them into investment properties.

    • Re: (Score:2)

      by Dan667 ( 564390 )
      I saw a show on it and china's real estate market is nothing like California. A lot of these investment properties are in high rises that don't even have stairs. It is a scam that a lot of Chinese have not been aware of since they often don't travel to these properties and information about it is suppressed.
  • How can this be true? A communist country is a utopia!

  • The Chinese system requires you to pay up-front for a property which has not been built, if you want it. So these people are paying off a home loan but they ain't got a home because so many Chinese builders have gone bust (often after the boss has legged it with a good proportion of the money advanced).

    Rural Chinese banks are going to the wall in droves too, partly because of this mess.

    You would think it was 1920's America the way things are going. And we all know what 1930's America was like because of it.

  • A similar thing happened in Spain in 2008: https://en.wikipedia.org/wiki/... [wikipedia.org] & it was brutal. There were couples & families who'd taken out mortgages on unfinished new properties & were still paying the mortgage or rent on their old ones. Many had to sell their old homes at recession prices & move in with their parents to avoid going bankrupt. There were street protests & non-payment campaigns there too. I'm sure there are other similar examples around the world.

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