Chinese official goes viral for telling people to buy multiple homes amid real estate crisis

As China’s housing crisis deepens and Chinese homeowners in 100 cities refuse to pay their mortgages, some local government officials are taking matters into their own hands.

Deng Bibo, county party secretary of China’s Hunan Province, encouraged everyone to buy multiple houses during his opening speech at a real estate fair in Shimen, a county in Hunan, on Tuesday.

“I hope today all the comrades will take the initiative to buy a property,” Deng said. “Buy one property, then buy a second. If you’ve already bought a second, buy a third. Bought a third? Then buy your fourth.

The speech went viral on Chinese social media, with netizens mocking the claim. Douyin, the Chinese version of TikTok, has been flooded with videos of Deng’s speech that attracted tens of thousands of user comments on each video. One user sarcastically replied, “It’s as easy as buying vegetables at the vegetable market.” Others wondered where they would get the money to buy several houses.

Deng’s speech highlights China’s struggle to contain a growing crisis. For decades, Chinese citizens have invested their money in real estate, with a huge share of Chinese household wealth (70%) being stored in real estate. In China, buyers pay up front for a house. These pre-sale funds essentially offered interest-free loans to property developers, which they used to rapidly develop construction projects.

But the central government noticed the scum in the housing market and tried to hold back developers ability to borrow money so easily. When that cash flow became constrained, it led to stalled construction projects and half-finished homes. This means that many homes that people have bought and paid for in full are not being built.

This crisis has intensified in recent weeks as homeowners across the country have begun refusing to pay their mortgages due to stalled projects and unfinished homes.

The country’s property problems threaten to upend its social stability – China’s middle class has long relied on property as its main source of wealth, and it accounts for 25% of China’s economy. It means Chinese citizens are seeing their favorite ways to invest no longer work for them, as the country faces its biggest economic downturn in decades.

Nationwide boycotts

China’s debt-fueled property market has been thrown into turmoil since last year, when Evergrande – the country’s most indebted developer with $300 billion in debt –by default on his dollar bond payment and nearly collapsed.

Since then, the sector has faced a severe cash crunch and many developers have been unable to pay their vendors, construction crews and deliver completed apartments to landlords who have already paid them.

Chinese homeowners began banding together in July to stage protests and mortgage boycotts. Over the past few weeks, homeowners have collected documents tallying the number of mortgage boycotts and project delays across the country, and sent letters to government officials detailing their fate.

Chinese censors have attempted to cleanse the web of such mob material and social media posts talking about the boycotts and project delays. Chinese authorities have also sought to reassure the owners that their units will be delivered. But protests and mortgage boycotts have spread rapidly, both online and offline. According to a crowdsourced list on GitHub, an online file repository that Chinese homeowners use to share documents, homeowners’ groups in at least 100 Chinese cities have threatened or begun boycotting their mortgage payments affecting more than 320 housing projects.

Chinese buyers usually pool the resources of the whole family to buy a house and have become accustomed to real estate prices only rising. This will not happen, however, if the houses remain unfinished.

“[I]It’s a matter of life and death… if their homes become negative assets,” Alfred Wu, Associate Professor at the National University of Singapore, told Bloomberg in July.

Widespread mortgage boycotts could worsen developers’ cash crunch. An estimate by Australia’s ANZ Bank says the protests could affect more than $220 billion in home loans from lenders.

Turbulence to come

China’s central government now faces a dilemma: find a way to restore consumer confidence in the property market and end the boycotts without completely bailing out property developers.

An obvious solution would be for the government to step in and bail out the country’s struggling property developers, who could then resume housing construction projects.

But Houze Song, a fellow at the Paulson Institute, a US-China-focused think tank, wrote in a August Note that this solution is politically difficult, given that Beijing fears transferring all the costs to the central government. This means that it comes down to small local municipalities.

“From now on, containing the problem has been left to local governments’ own devices. But they are increasingly… overwhelmed as the problem worsens, as unfinished projects are heavily concentrated in cities with weak real estate markets and anemic growth,” Song said. “This means that the size of the bailouts needed is disproportionate to the fiscal capacities of these local governments.”

The Shimen Real Estate Fair, where Deng Bibo spoke, featured 19 developers and 10,000 households. The county government offered coupons worth $442 to any potential buyer and promised it would subsidize 50% of the property tax on any home sold. Local officials in other counties have also taken matters into their own hands: Officials in Yulin, Guangxi, went door to door telling villagers to collectively buy at least 8,000 homes this year, according to Chinese media.

In response to the outcry over Deng’s speech, Shimen County officials told Chinese media that he only wanted to encourage everyone to buy a house – not to over-analyze his words.

Song argues that the current mortgage crisis will become “much bigger” than Evergrande’s default a year ago.

“The solution requires Beijing to spend considerable political capital, rather than just financial capital,” he said.

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