Hong Kong’s Real Estate Lesson for China

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.

- Shuli Ren

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.