The city of Wenzhou in Zhejiang province has long been known as a centre for entrepreneurial zeal, but after nearly three years of sliding home prices it is becoming known for something else innovative in China – walking away from your mortgage.
According to report in Shanghai’s National Business Daily this week, the wealthy coastal city is now home to a growing number of non-performing loans and more investors are walking away from their properties as they are unable to refinance due to tighter credit.
At the end of the first quarter of this year non-performing loans in Wenzhou had reached RMB 33 billion and amounted to 4.52 percent of total loans in the local market, according to the report. And the non-performing loan ratio has continue to rise, going up 0.16 percentage points in April. Zhang Ming, an official with the Wenzhou finance office indicated that the majority of the bad loans in Wenzhou were related to real estate investments.
This percentage of bad debt is a significant departure from the 0.37 percent non-performing loan ratio prevalent in the city during 2011, before the property market began its extended slide. As of July last year the city had found 595 cases of homeowners abandoning their properties because of inability to pay their debts, and the figure is expected to have grown considerably since then.
Property Market in a Downturn for More Than 29 Months
Official government figures released by the National Bureau of Statistics on Friday showed that among China’s 70 largest cities, Wenzhou is the only community where June housing prices fell on an annualised basis. According to a survey released earlier in the month by a private real estate agency, home prices in Wenzhou have fallen on a month to month basis in the city for 34 consecutive months.
In August last year Wenzhou became one of the first cities in China to officially relax controls on housing purchases in a bid to stimulate demand, however, its decision to allow existing homeowners to purchase additional properties seems to have done little to stem the price slide.
More recently, the coastal city has become a centre for new home sales incentives from developers with Zhejiang-based DoThink Group offering prospective buyers the guarantee of at least a 20 percent return on their housing investment over a three year term.