Falling property prices in China’s eastern city of Wenzhou triggered 6.4 billion yuan ($1 billion) of bad loans as buyers abandoned homes and stopped making mortgage payments, the Economy & Nation Weekly reported.
Purchasers of 1,107 properties halted payments as prices dropped for 34 straight months, the Xinhua News Agency-affiliated magazine said yesterday on its website, citing data from the local banking regulator. A press officer at the Wenzhou branch of the China Banking Regulatory Commission declined today to confirm the data.
China’s slumping property market is a drag on the world’s second-biggest economy and banks’ profits, with lenders’ soured loans increasing for almost three years. New-home prices fell last month in 64 of 70 cities tracked by the government.
In Wenzhou, about 56 percent of the homes were abandoned due to falling values and most were high-end apartments, according to the report. Homes were also abandoned by borrowers left with liabilities after making guarantees for companies in financial trouble, the report said.
Real-estate lending accounts for 26 percent of outstanding bank loans in Wenzhou, 8 percentage points higher than the national level, according to the report, which didn’t specify a time period for the data.
The city’s economy expanded 6.8 percent in the first half, according to the local government, compared with a 7.4 percent expansion nationwide. China’s economy is forecast to expand 7.4 percent for the full year, the slowest pace since 1990.
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