In recent years, China’s real estate market has fallen into a housing crisis, with housing prices continuing to decline. Against this backdrop, a wave of “negative-equity mortgages” has erupted across the Chinese property market. More and more homebuyers are discovering that their assets have not only shrunk dramatically, but that they can’t even pay off their loans by selling their homes. Some people have lost their houses and their down payments, yet still must carry the bank debt and continue repaying their loans.
So what exactly is a “negative-equity mortgage?” Let’s listen to this blogger’s explanation:
“Negative-equity mortgages are crushing young people. Just hearing the name is enough to make you uncomfortable. What does it mean? It means the home you bought after emptying six wallets, taking on decades of debt, the home you thought was the safest asset—its current market price has already fallen below the amount you still owe the bank.
For example, you bought a home for RMB 6 million. You paid RMB 1.8 million as a down payment and borrowed RMB 4.2 million from the bank. After struggling to make payments for more than three years—throwing more than half of your monthly salary into the mortgage—you might have paid back maybe just over RMB 300,000 of principal. However, because most of your payments in the first few years went toward interest, you still owe nearly RMB 4 million.”
At this point, maybe due to job changes, family reasons, or simply feeling overwhelmed, you decide you have no choice but to sell. But when you check the market, your heart sinks. The same unit can now sell for at most RMB 3 million. You grit your teeth, swallow your tears, and finally find a buyer and sell the house.
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Now let’s do the brutal math. The house sells for RMB 3 million, but you owe the bank nearly RMB 4 million. Even if you hand over every cent from the sale, you still owe the bank nearly RMB 1 million. Not to mention your original RMB 1.8 million down payment, plus the several hundred thousand yuan you paid in mortgage installments over three years—everything has vanished into thin air.
The end result? The house is gone, the down payment is gone, the money you spent on mortgage payments these past years is gone—yet you, once a property owner, instantly become a “negative-wealth” debtor, owing the bank close to a million. This is what negative-equity mortgages mean. It’s not just “cutting your losses”—it’s more like amputating a limb and still bleeding out.
China’s post-pandemic economy
At present, China’s post-pandemic economy continues to worsen, and housing prices are falling faster. According to data from the China Index Academy in October 2025, second-hand home prices in 100 major cities fell 0.84 percent month-on-month and 7.60 percent year-on-year. In some cities, housing prices have fallen back to 2017 levels, dropping more than 40 percent from their peak.
On Nov. 8, a blogger named “Little Mo Is Me” shared her honest feelings. She said the 2021 property market was a mass extraction of wealth from ordinary people. Today, people have drained their savings, exhausted their energy, and destroyed their families.
“This was me. In 2021, I bought a home for nearly RMB 7 million. Now, nobody is willing to pay even RMB 3 million. The houses bought at the peak in 2021 have become shackles for countless families. When I previously posted a video about my failed home purchase, I never expected so many people in the same situation to come forward. Over the past few days, I’ve received hundreds of private messages—each one made my chest tighten. It turns out I wasn’t the only one trapped by the housing market.”
Let’s start with Ms. Zhang from the neighboring development. In 2021, she followed the crowd and bought a large three-bedroom unit in the same community. To scrape together the down payment for her second home, she even sold her family’s shop back home. Now the unit has lost RMB 1.6 million in value. Her husband’s company laid off employees, and they’ve missed three months of mortgage payments. The bank’s collection calls come from morning to night. She’s preparing to move her child into a rental apartment and sell the house at a steep discount—but after two months on the market, nobody has even asked about it.
Another netizen, “A-Zhe,” got married in 2021 and emptied the savings of two families to buy a marital home. Now the home’s value has halved, and the monthly mortgage is higher than rent. He says the most painful thing is that every argument with his wife ends with “Why did we buy this house?” Their formerly peaceful life has been thrown into chaos by a single property. Now he delivers food during the day and works as a designated driver at night to scrape together the mortgage payment. He’s afraid of falling behind and damaging his credit—and they don’t even dare have children.
The story that hit me the hardest was a middle-aged man. In 2021, he bought a home for his son’s marriage, using up his retirement savings and borrowing an additional RMB 200,000. Now the home cannot be sold, and his son’s wedding fell apart. The man works two jobs every day. Last month, a medical exam showed he has hypertension and diabetes, but he refuses to spend money on treatment. He says he must save every cent to repay the mortgage so his son won’t have a “dishonest borrower” record.
Reading these stories, I suddenly realized that the 2021 housing market was a harvest of ordinary people. We believed the lie that buying always leads to profit. We poured in every ounce of strength to chase a false sense of security—only to be drained of our savings, our energy, and even our families.
I’m not saying this to gain sympathy. I just want more people to understand what we—ordinary people drowning in the housing bubble—are experiencing. And I want to tell those who haven’t bought a home: don’t get fooled by slogans like “rigid demand must buy” or “the more you buy, the more you earn.” Buying a home is not a life requirement; living steadily is.
The main victims
According to mainland media reports, the main victims of negative-equity mortgages fall into three groups:
- People who emptied “six wallets” and borrowed to buy homes
- Buyers of unfinished projects
- Freelancers and gig-economy workers who followed the hype to buy
Under the current economic conditions in China, homebuyers can hardly avoid the risk of negative-equity mortgages.
Let’s look at a real case—a blogger helping his clients calculate the numbers behind a true negative-equity situation.
“Our clients, a couple surnamed Tang, bought a home purely out of necessity. They met at a logistics company, got married, and then started their own small business. They have two kids, one in senior kindergarten and one in junior kindergarten. After eight years of marriage, their business and family were stable, so they wanted to settle their housing and schooling issues.”
The couple scraped together RMB 1.8 million. The wife’s parents helped with RMB 200,000, and the husband’s parents added another RMB 300,000, totaling RMB 2.3 million. In November 2020, they bought an 89-square-meter unit in Vanke Golden Domain for RMB 6.6 million. They paid RMB 2 million as the down payment, with RMB 170,000 in taxes and agent fees. After simple renovations, they spent RMB 2.32 million in total and borrowed RMB 4.6 million from the bank with a 30-year mortgage and a monthly payment of RMB 26,400.
They put their life savings—and the savings of both families—into this home. The husband’s parents even moved in to help care for the two kids, giving the couple more time to run their logistics business. But these peaceful days did not last long. By the end of 2023, the home’s value fell to RMB 4.5 million. By the end of 2024, it fell to RMB 4 million. And now it’s only worth about RMB 3.5 million.
As of October this year, they’ve made 47 payments totaling RMB 1.24 million. Of that, only RMB 260,000 is principal; the remaining RMB 980,000 is interest. They still owe the bank RMB 4.34 million. Roughly speaking, including the initial RMB 2.32 million and the mortgage payments, they’ve paid RMB 3.56 million. Selling now would require them to add RMB 840,000 out of pocket. In four years, they’ve sunk RMB 4.4 million into this home, and they may end up with nothing—no house and no money. Their life’s efforts evaporated.
Banks jump directly into the real estate market
Meanwhile, in recent weeks, several major Chinese banks have jumped directly into the real estate market, putting large numbers of repossessed second-hand homes up for sale, sparking widespread attention. Compared with ordinary listings, these properties are typically sold below market value—some as low as half the market price. Most of these units were repossessed from companies or individuals who couldn’t make their payments. Banks are bypassing formal foreclosure auctions and selling directly under the label “bank-direct supply.”
Online videos have people worried that the harshest winter in China’s real-estate market is coming.
“Banks nationwide are selling homes in a clearance-style purge. A housing market storm is brewing. The Sichuan Rural Credit system alone listed 24,000 units. Guangdong Rural Credit listed 12,000. Liaoning Rural Credit listed 11,000. What does that mean? It’s equivalent to dumping the entire inventory of a mid-sized developer onto the market at once. And the prices are insane.
A home valued at RMB 2 million is being sold by the bank for RMB 1.5 million—a 25 percent discount. But think about this: when even banks, the institutions that understand money the best, are desperately dumping homes, what does that really signal?”
Another blogger says Jilin Bank has more than 2,000 units, Tianjin Bank more than 1,200, and Lanzhou Bank added 1,800 this year. State-owned banks are also following along—Agricultural Bank, Construction Bank, Bank of Communications—all selling at low prices across online platforms. Why are banks doing this so aggressively? It reveals the downward spiral of the property sector—first individual households, then developers, then local governments, and finally the risks are passing into the banking system. Before, it was Evergrande and Country Garden having problems. Now banks themselves are holding piles of repossessed collateral as debt assets.
What signals does this wave of bank home-selling send?
First, the number of “bank-direct” properties has surged to unprecedented levels. On Alibaba’s asset platform, in the “Bank Clearance” section, listings from banks nationwide are densely packed. State-owned banks, city banks, rural commercial banks—everyone is joining in. And low prices are the most prominent feature.
A blogger explains bluntly: China’s economic downturn and falling home prices have led to rising defaults. Banks are recovering large numbers of homes and releasing them into the market at low prices, placing new downward pressure on the entire housing market. In the end, ordinary people will suffer the most.
“Right now, banks are dumping these houses through internal systems and platforms like JD.com. What are the prices? Typically 50 to 80 percent of market value. Some are even more shocking—like a project in Lanzhou selling at RMB 2,300 per square meter—below construction cost. In one community in Liaoning, 156 units have starting prices as low as RMB 80,000, none exceeding RMB 200,000. How are second-hand homes and new developments supposed to compete with that? And where did all these bank-held houses come from?”
In fact, most of them were originally foreclosure units, but foreclosure transactions are extremely low. In the first half of 2025, the national foreclosure transaction rate was only 15 percent. The foreclosure process takes too long, so banks find it easier to sell homes directly. Even at lower prices, they can adjust prices flexibly and recover cash more quickly. Buyers also feel reassured because the property title is already clean and held by the bank—no occupancy disputes, no unclear ownership—far easier than buying foreclosures.
The surge in negative-equity mortgages
If you connect the recent wave of price cuts in nearly new homes, the surge in negative-equity mortgages, and the flood of bank-direct sales, you can see the chain reaction: falling prices → negative equity → more defaults → banks repossess homes → banks dump homes at low prices → further market pressure. Bank clearance sales are simply a market re-pricing process. But with tens of thousands of listings from just a few provincial rural credit systems, the downturn could last a long time.
The second signal: nonperforming loans at banks across China are soaring. According to a report by Kaiyuan Securities, mid-2025 data shows that mortgage NPL rates at listed banks are rising overall, with some banks up more than 20 basis points. At the same time, NPL rates for personal business loans are also increasing, with some banks up more than 30 basis points.
As home prices fall, cash flow tightens for many borrowers. Mortgage and business-loan NPL rates are climbing, and the volume of collateralized homes held by banks is ballooning.
The third signal: the large-scale dumping of collateralized homes by banks will severely disrupt the nationwide housing-price structure. This could create a vicious cycle: the more banks lower prices, the more local housing prices drop, which causes more mortgaged assets to become underwater—forcing banks to dump even more homes.
As one blogger clearly explained, the surge in bank-direct listings shows that China’s housing downturn is far from over—and the outcome will be even more severe.
“If you observe carefully, you’ll find that most of these bank-direct properties come from third-, fourth-, fifth-, and sixth-tier cities where liquidity is practically nonexistent. These are properties that couldn’t even sell in foreclosure auctions—and have now become nonperforming assets for banks.
So how will bank-direct sales affect the real-estate market? Their rising number signals something major: the downturn is not over.”
The increase in bank-direct listings will accelerate declines in the second-hand market. It also shows that stabilizing the market will require more than slogans—China urgently needs deeper rate cuts and stronger pro-housing policies.
But for homebuyers, do bank-direct sales offer bargain opportunities? The answer is no. China’s real-estate bubble is even larger than Japan’s was 20 years ago—its bottom is nowhere in sight. The CCP is forcefully suppressing the crisis, like holding back a flood behind a dam. When that dam breaks, it will be too late to run. The outlook is extremely alarming.
