Remarks
Hong Kong’s Fix for China’s Mortgage Boycotts
The presales model has advantages for both buyers and developers—but the apartments have to get built.
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The refusal of some Chinese consumers to pay mortgages on unfinished homes has shed light on the sales model that dominates the country’s trillion-dollar real estate market, where apartments are often bought 18 months to two years before they’re completed. Presold units account for more than 70% of residential home sales.
Once a contract is signed, a homebuyer’s down payment and mortgage proceeds from the bank are wired into an escrow account. In theory a developer can gain access to some of that money for construction and get the rest only when the home is handed over.