China Massive Mortgage Fraud Reveals Extreme Threat To Real Estate

This is my Third Video on the China Real Estate Crisis.

In the United States, Smart money is still going into Real Estate. Big Institutional Investors, Small Investors, and If you want to move or downsize, it's still a great market to sell, but a bit more challenging than in the last few years. f you are looking to buy a home and live there for a while, real estate has always been a great long-term builder of wealth and there is nothing to suggest that is changing if you can afford the home.

Finally, if you can find a property that will give you cash flow, this is a great time to get solid cash flow and enjoy the tax benefits of real estate.

China has been trimming interest rates recently – in contrast to other major economies – as it tries to stem the economic effects of its zero-COVID policy and address a growing property crisis. The country’s traditionally strong housing market has been affected by a funding crisis that has seen development paused and led to buyers refusing to pay their mortgages.

To date, more than 300 groups of homeowners are believed to be refusing to pay between US$150 billion (£127 billion) and US$370 billion in home loans, according to informal surveys published online.

These protesters all have one thing in common: they have been paying mortgages, often at a rate of 5%-6%, on homes they have never lived in. These properties were sold before they were built under what’s called the presale system, which is a common way to buy property in China.

The trigger for the buyers’ strikes is a widespread belief among these protesters that the funds homeowners have paid in advance to the builders of these property developments have been misused.

Under the presale system, buyers deposit money in an account before the property is built. Chinese banks and local authorities are obligated to monitor developers’ use of these funds. Developers are not supposed to have access to all of the money until they have hit certain pre-agreed milestones during the building process.

But buyers have recently complained that many banks –- whether or not local authorities are aware is unclear –- have been providing loans to developers before the required stage of work has been reached.

Buyers have also complained that, although these funds should have been kept in designated escrow accounts that regulators can monitor, sometimes they are not, enabling developers to evade regulations. Overall, these buyers believe loose regulation of funds has provided some developers with both the temptation and ability to keep investing in new projects, by borrowing more before current projects are completed.

Indeed, a commonly observed pattern in China’s property development industry is for developers to purchase lands, pledge them to banks to get loans, start projects, begin the presale process with buyers and then use these funds to purchase lands for other projects.

In such situations, only a portion of a buyer’s funds might go towards the construction of their own property. As a result, a recent liquidity crisis in the sector has stalled many projects because the developers involved can’t afford to continue building.

Be Creative and kind!
Connect on:
Instagram: https://www.instagram.com/themcclonebrothers/
Twitter: https://twitter.com/themcclonebrot1
LinkedIn: https://www.linkedin.com/in/themcclonebrothers/
www.globalestatepropertygroup.com

@Tim McClone ​