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<Research>UBS Expects Mainland CN Negative Equity Residential Units to Rise to 3.3M by 2027, Leading to RMB232B Loan Losses for Banks
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The persistent downswing in property prices in Mainland China aroused market concerns about the default risks of mortgages and SME business loans secured by properties, UBS said in a research report. The broker estimated that the number of negative equity properties in mainland China will increase from approximately 700,000 units in 2025, equivalent to 10% of the annual new home sales, to 1.8 million in 2026 and 3.3 million by 2027. This will increase the proportion of new home sales to 28% and 55% in those years, respectively. The net loss on related mortgage loans is expected to rise from RMB34 billion in 2025 to approximately RMB232 billion in 2027. Leveraging negative equity value as a proxy, UBS projected that large SOE Chinese banks will need to provision an additional amount equivalent to 2.6% of 2027E PPOP p.a. over two years, while joint-stock banks will need 1.4%. PSBC (01658.HK) is expected to be most affected, while HUAXIA BANK (600015.SH) is expected to be least affected. AASTOCKS Financial News Website: www.aastocks.com |
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