China should shield against the dangers of falling property prices and a potential crisis if home values drop below mortgages, a prominent state-linked economist warned, reports Bloomberg. Li Yang, chairman of the National Institution for Finance & Development, said that some Chinese cities have already set a floor for property prices as well as price caps, and the vacancy rate in some regions have topped 10%.
“If one day the value of houses plunged below the mortgage value, people won’t even be able to repay their debt by selling the houses, and that would be a real crisis for the property market,” Li said at a forum on Aug. 29.
China’s home ownership rate was 90% in 2020, far higher than the global average of 69%, which makes it difficult for cities to contain price increases and speculation in the market, according to Li. China needs to create an effective rental market, he added.