According to credit rating agency Standard and Poor’s Global Ratings (S&P), China’s real estate sales will decrease by about 30% this year. The drop doubled the firm’s forecast. 

S&P attributed homebuyers’ recent mortgage payment boycotts to the sharp decline. 

Director at S&P Global Ratings, Esther Liu, told CNBC on Wednesday that the fall was worse than the financial global market crisis in 2008 when the fall was about 20%.

Unlike in the Western property market, homebuyers in China pay their mortgage for unfinished buildings because most homes are sold before completion, giving developers a key source of cash flow along with cash borrowed from banks.  

With a slowing market and the Chinese regime’s crackdown on the industry for the last two years, real estate developers are struggling to seek financing for their projects. 

Many developers, including the industry champion Evergrande, fail to fulfill their debt obligations as a liquidity crisis hits the sector. 

CNBC cited Esther Liu saying that the current mortgage boycott wave hurts market confidence which can delay the recovery to next year. 

More importantly, Liu noted that possible social unrest could happen if homebuyers do not receive the houses they paid for.

As Bloomberg reported, Citigroup analysts released a research report on July 13. They revealed that homebuyers of 35 projects in 22 cities in China have stopped paying mortgages as of July 12. The analysts cited the delay in construction projects and falling prices in the property market as the major reasons behind the boycott.

The Financial Times cited data from consultancy firm Dealogic reporting that about $13.3 billion in dollar bond payments from more than 60 property companies will come due before the end of this year.

Caixin Global reported that about 200 major Chinese property developers had to pay $26 billion of debts in June and July. 

Last month, another credit rating agency Moody’s, also issued 91 downgrades for high-yield Chinese property developers in the previous nine months.

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