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A woman walks near the construction site of apartment buildings in Beijing, on July 15.THOMAS PETER/Reuters

Chinese regulators’ assurances of help in delivering property projects on time failed to convince some homebuyers threatening to stop mortgage payments and investors continued to sell shares in embattled developers on Friday.

A growing nationwide homebuyers’ boycott has rekindled investor concerns about China’s slumping property sector, which accounts for a quarter of the economy, and raised fears banks could face hefty writedowns.

Up to 1.5 trillion yuan ($220-billion) of mortgage loans are linked to unfinished Chinese residential projects, ANZ estimated in a report.

Shares in Chinese property developers extended losses, even after the banking watchdog vowed to strengthen coordination with other regulators to “guarantee the delivery of homes” and at least 10 banks said mortgages related to risky projects are relatively small, and risks are controllable.

The regulatory assurances came as homebuyers’ threats to withhold payments for stalled property projects have proliferated in official and social media in recent weeks, in a rare show of public discontent.

The Hang Seng Mainland Properties Index tumbled 5 per cent on Friday, dragging the Hong Kong benchmark index down 2.2 per cent.

Among those hardest hit, shares in Shanghai-based CIFI Holdings plunged 14.3 per cent, while top developer Country Garden Holdings Co Ltd fell 8.6 per cent.

Developers’ bonds also took a heavy hit.

A 2026 dollar bond of Yuzhou Properties traded at 6.354 cents on the dollar on Friday afternoon, down from 6.861 a day ago, while a 2024 bond of Xinyuan Real Estate dropped to 11.125 from 12.425.

Onshore, a yuan bond of Powerlong Real Estate and Sino-Ocean Group < 3377.HK> slid 20 per cent and 16 per cent, respectively.

Government assurances were not enough to convince at least some homebuyers threatening to stop mortgage payments.

One homebuyer in the east-central Chinese city of Zhengzhou said on Friday that while local authorities assured buyers that the developers would resume construction soon, there hadn’t seen any action on the ground.

“We don’t have any other way to voice at the moment and we’re still in a desperate situation,” said the person, who declined to be identified due to sensitivity of the matter.

In a letter issued to the Xinyuan homebuyers in Yingyang, Zhengzhou, on Friday and seen by Reuters, the housing regulator said it along with other government departments had reached an agreement with the developer and the contractor that some funds would be paid to resume construction.

Another homebuyer in the northern-central city of Nanchang told Reuters that after regulatory assurances late on Thursday some people in his city had drafted an open letter to report developers’ “misdeeds.”

Earlier on Thursday, local regulators in Xi’an, a city in west China, said they would tighten oversight of escrow accounts and make sure money put down by home owners isn’t transferred illegally by property developers.

The widening mortgage boycott has added to worries about a prolonged slump in China’s property market and the risk of possible social unrest. Date on Friday showed property investment, home sales and new construction starts continued to slump.

“Things will get worse before they get better,” said Xiaoxi Zhang, China finance analyst of Chinese research group Gavekal Dragonomics.

“China has been determined to curb the leverage (taken on) by property developers and the government will still try to refrain from providing liquidity to them in a big scale. It will take time for some more targeted measures to be issued,” she said.

As property firms stocks weakened, a selloff in banking shares also gathered steam amid investor concerns that the mortgage revolt may snowball.

An industry gauge tracking mainland banks closed down 1.6 per cent.

Tommy Xie, head of Greater China research of OCBC Bank, said the mortgage repayment suspension is turning from a “liquidity crisis (for) property developers to a financial crisis,” and has made it urgent for the central government to step in.

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