In a recent interview, a nearly 50-year-old Beijing resident named Xiao Huang expressed frustration as she recounted her experience of getting stuck in a housing investment. She lamented that many others in similar situations have become “bottom feeders” in the plummeting real estate market, unable to sell or rent out their properties, ultimately facing a liquidity crisis.
Xiao Huang, who previously worked for major Chinese companies such as Alibaba and Toutiao in the field of corporate social responsibility, decided to purchase her first home in 2017 due to her divorce and transition to single life, compounded by her age. The property is located in Langfang City, Hebei province, about 40 kilometers away from her residence in downtown Beijing.
Being introduced to a group purchase opportunity by friends, Xiao Huang acquired the property at a discounted price of over two million yuan, as part of a collective buying initiative. The house is still under construction and she currently pays over 5,000 yuan per month towards the mortgage.
Initially, Xiao Huang’s intention was simple – to profit from the increasing property value, or to generate rental income by having her own place, providing additional security for her retirement. However, having not kept a close eye on the real estate market trends, she never anticipated being caught in the current downward spiral of property prices, unable to sell her investment even at a loss.
The issue of whether she can still receive rental income from the property that remains unsold adds to Xiao Huang’s worries. Living in a newly developed community where many homeowners, like herself, are investment-oriented and do not have plans to occupy their properties, she finds herself in a predicament where promised amenities and infrastructure have not kept up with demand, leading her house to remain vacant and unused.
In recent years, property prices in locations like Langfang and Yanjiao have taken a significant hit, with foreclosed properties becoming a common sight in what used to be hotspots for real estate speculation.
Numerous individuals share similar unfortunate experiences, with one user on Weibo recounting how he purchased a property in Yanjiao for 4.26 million yuan in 2017, only to discover that after four years of paying off 800,000 yuan in mortgage, a mere 160,000 yuan went towards the principal amount, while the rest was interest. Feeling the sting of the market downturn, he found himself unable to sell his house at a significantly reduced price, leading him to default on the mortgage payments.
The trend of foreclosed properties is not limited to Langfang and Yanjiao, but is seen in various towns around Beijing due to their proximity to the capital, attracting individuals with limited savings looking to invest. However, with the overall decline in property values, these investments have lost substantial value.
The number of foreclosed properties in China has seen a sharp increase in recent years, with data from the China Index Research Institute showing that as of January this year, the amount of properties up for foreclosure soared to 100,400 (including 51,400 residential properties), a 48.2% rise from the previous year.
The Institute attributes the surge in foreclosed properties to factors such as loan defaults and borrowing guarantees, where individuals who face financial difficulties after purchasing high-priced properties are unable to meet their loan obligations, leading to their properties being auctioned off.
For Xiao Huang, the prospect of having her property foreclosed due to financial distress could result in being put on a “high restriction” list, limiting her ability to engage in high-end consumer activities such as flying or taking high-speed trains, which would be extremely inconvenient for someone like her who frequently travels to other provinces for work.
The story of Liu Xiangsheng, a migrant worker who bought a property in Yanjiao during his second year of employment, reflects the struggles faced by many. At the peak of the property market in 2017, Liu took out a loan for a second property through a fabricated divorce scheme. Unfortunately, he purchased his second property at the highest point, with both of his properties now significantly devalued. The burden of the nearly 25,000 yuan monthly mortgage payment became unsustainable for Liu due to business losses, leading him to default on the loans and wind up on the credit blacklist.
After his property was auctioned off by the court in 2017, Liu still owes the bank nearly a million yuan, highlighting the harsh realities faced by individuals caught up in the turbulent real estate market.