Property owners in areas around Beijing have been giving away their flats rather than continue to pay their mortgages, after four straight years of dropping values have left their homes worth less than their outstanding loans, according to a report from Xinhua News Agency.

The report said Hebei province homeowners in the cities of Sanhe and Zhuozhou, as well as in Gu’an county, have been unable to sell their properties in the current market downturn. They have chosen to give away their properties, accepting the financial loss, because they can no longer afford to cover the debt.

Zhang Yumei, an economics professor at Hebei University, commented that such flats are not really free, because the new owners must pay the outstanding mortgage. It would actually be cheaper to buy a new flat if the price of a second-hand unit has dropped more than 30%, because such a drop would leave it in negative equity, she added. Besides, nobody will take a “free” flat unless they can get a discount from the mortgage issuer, Zhang said.

A Xinhua reporter found that the property business in the Hebei town of Yanjiao has been hard hit by the downturn in values. Many shops that housed property agents have turned to other kinds of businesses, the reporter said.

Property agent Xia Jie told Xinhua that most of the buyers in the local market have usually come from Beijing, but there were almost no customers from Beijing in the first half of 2020 because of pandemic-related border closures, forcing many property agents to leave the industry.

A Shijiazhuang resident identified as Dao said he bought a flat in Xianghe county, Hebei, for 1.9 million yuan (US$290,000) in 2016. Its value rose briefly the following year but has dropped steadily since then to less than 1.4 million yuan, Dao told Xinhua.

Zheng Qiu, a property agent in Zhuozhou, said the prices of many flats have dropped by half since 2017, and the dwindling market reduced his activity to only 20 transactions in 2020. Most current purchases are local people switching to bigger flats, he said.

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