(Yicai) Aug. 16 -- The number of foreclosed properties in China rose almost 20 percent in the first half from a year ago due to the build-up of cases over the pandemic years and because owners have failed to pay mortgages after their incomes fell, according to a new report.

Some 304,000 foreclosed properties, including 179,000 homes, a big increase on a year earlier, were put up for auction in the six months ended June 30, the China Index Academy’s report said.

A number of corporate and individual property owners defaulted on mortgage payments after China’s economic growth slowed, resulting in legal action and court orders, Wang Yuchen, head of Beijing Jinsu Law Firm, told Yicai.

The biggest increase in the first half was seen in central China, with foreclosures in Henan province surging over 63 percent, the report showed. Sichuan province in the southwest had a 51 percent uptick. Other hotspots were Guangdong and Jiangsu provinces, as well as Chongqing.

Even some luxury properties in first-tier cities were forced to be sold. For example, some large homes in Shenzhen went for a staggering CNY114 million (USD15.6 million).

The seeds of the sudden jump in foreclosure were planted well before as it takes at least one to two years to go through the process, Wang Shenglan, general manager of Lanjing Investment Management, told Yicai.

The main reason for this year’s increase is that the entire chain for disposing of non-performing assets has gradually returned to normal following the lifting of Covid-19 prevention and control measures, she said. A backlog of cases has accumulated over the past few years.

Still, slowing economic growth will mean the proportion of borrowers in mortgage default will rise, Wang said, so there will be more foreclosures next year and in 2025, but perhaps increasing by no more than 20 percent.

The China Index Academy’s report also said more homes are changing hands at auction in the Yangtze River Delta and Pearl River Delta due to the regions' economic activity, whereas western regions such as Qinghai province and Ningxia Hui Autonomous Region have lower turnover despite more listings.

Editors: Tang Shihua, Emmi Laine