The payment refusals underscore how the storm engulfing China’s property sector is now affecting the country’s middle class, posing a threat to social stability. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults.  

Now is “a critical time for social stability,” said Chan, adding that “the forgoing of down payments may bring social instability.”

A drop in home values hasn’t helped. Average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years, according to Citigroup’s research. 

Eoin Treacy's view

How much do prices have to fall before consumers give up hope they will ever recoup their down payment through a sale? I guess we have the answer in China where many of the home purchases are speculative to begin with and tens of millions of apartments stand vacant at the best of times.
 
Commentators spend a lot of time talking about how unsustainable the debt cycle is in the USA and Europe but are reluctant to apply the same logic to China.
It is well understood growth has been fuelled by debt and leverage for the last decade. That cycle is totally dependent on official willingness to continue to step in to inject additional liquidity.
 
Xi’s statement that homes are for living in, not for speculation, the continued intensification of social control measures and less than enthusiastic liquidity provision suggest this time they might be serious about asset price contraction.