China’s property crisis sees homeowners scramble to pay off mortgages at record pace
- Data on early repayments and new mortgage loans does not bode well for China’s efforts to stimulate housing demand and absorb inventories
Celine Jiang, a university teacher in Guangzhou, is trying to sell her two-bedroom flat as quickly as possible to pay off the loan for a bigger unit she purchased at the end of 2022 for 12 million yuan (US$1.65 million).
“Like most ordinary Chinese people, I used to think housing prices and the economy would always go up. But now, the housing market has taken a sharp turn, and prices are continuing to fall,” Jiang said. “For me, the mortgage interest rate is too high, and I don’t have better investment options, so why not pay back the mortgage?”
For many households, investment expectations and risk assessments have drastically changed over the past two years. And with increasingly sluggish returns on various investments, many Chinese families are looking to repay their loans earlier.
Jiang hopes to sell her small flat for about 5 million yuan and use all of the proceeds to pay off the bigger house, which is now worth only about 9 million yuan.
“We bought this large apartment with plans to have a second child and live with my parents,” Jiang said. “Now … maybe the financial pressure is affecting our mood, and the child has not been conceived, yet.”
A research note from Guotai Junan Securities on June 6 said that the nation’s early-repayment rate of mortgages hit a historic high of 37 per cent in April, reflecting residents’ rising interest in freeing themselves of the financial burden faster than they had planned.
