BEIJING, May 27 (Reuters) – China’s latest steps to revive its struggling property market could pose risks to banks operating in lower-tier cities, S&P Global said on Monday.
The measures announced earlier this month such as cutting down payment requirements and removing the floor for mortgage rates are expected to temporarily increase property demand, but the increased leverage could also cause an uptick in mortgage defaults, according to a S&P Global report.
Property prices in smaller tier-three cities are expected to decline about 14% through the 2024-2025 period, the report said. This could potentially push some homebuyers into negative equity situations, where their outstanding mortgage balances exceed the value of their properties, it said.
Consequently, some homebuyers may walk away from their properties and default on the mortgages, the report said.
Source: REUTER
