BEIJING — China rural banks are struggling in late 2025 and early 2026 to sell a growing number of seized homes across the country even after cutting starting prices 20% to 30%, a sign China’s housing slump is turning once-reliable collateral into dead weight. UBS Group AG estimates foreclosed homes could rise to 2.43 million units in 2027 from about 640,000 in 2025, highlighting the scale of bad-loan losses still moving through the system, Jan. 22, 2026.
A Reuters review of bank-supplied listings found rural lenders in economically weaker provinces leaning heavily on auctions to offload repossessed apartments, shops and houses after borrowers defaulted. But even discounted units are often going unsold, extending the time banks sit on assets that can be difficult to manage, hard to value and costly to maintain.
Much of the inventory is marketed through JD.com’s asset auction platform, where listings can cycle through multiple rounds after court-led seizures. In Liaoning province, a 160-square-meter apartment offered by Bank of Jilin’s Dalian branch at 1.35 million yuan failed to sell even after a second attempt, compared with an estimated 2 million yuan market price at the time, a local real estate agent told Reuters. “The prices are shockingly low,” the agent said.
Data pulled from those listings show how quickly the wave has grown in some regions. Banks in Gansu province offered 4,292 properties in 2025, up from 478 in 2023, according to Reuters’ calculations. In Sichuan, lenders listed 1,909 properties in 2025, versus 248 two years earlier — the kind of surge that can swamp local demand when buyers still expect prices to fall.
Why China rural banks are stuck with unsold collateral
The auction pileup reflects a property slump that began in 2021 and has weighed on household confidence and local-government finances. Price pressure remains widespread: China’s official 70-city price data show many cities posted month-to-month declines in November 2025. For China rural banks, that matters because property has long been treated as top-tier collateral for small-business and household borrowing.
UBS estimates banks have cumulatively put up about 1.35 million properties acquired through defaults since mid-2024. The firm also forecasts home prices will keep falling — about 10% in 2026 and 5% in 2027 — meaning recovery values could shrink further even as more seized units hit the market. “The entire industry still has oversupply,” UBS property analyst John Lam told Reuters.
Regulators brace for a longer clean-up
Beijing has pushed banks to dispose of bad assets more quickly, while trying to avoid policy moves that would reignite speculation in housing. This month, the National Financial Regulatory Administration extended a program allowing banks to transfer pools of nonperforming personal loans in bulk through the end of 2026, Reuters reported, as lenders grapple with rising consumer-loan defaults and thinning margins.
The strain on China rural banks is also tapping into older fault lines around confidence in small lenders. In 2019, regulators took over Baoshang Bank — a rare intervention that jolted funding markets and refocused attention on vulnerabilities at smaller institutions, according to a Reuters report. In 2022, authorities announced rounds of repayments after deposits were frozen at several rural lenders in Henan and Anhui provinces amid a fraud investigation, Reuters reported.
What comes next may hinge on whether foreclosed sales remain a niche disposal tool or become a broader price-setting force. Analysts quoted by Reuters cautioned that 20% to 30% discounts are not typical — and that widespread fire sales could undermine market stability and prompt official intervention. For China rural banks, the ability to move seized homes without triggering a sharper price slide may be a key test of how far the property downturn still has to run.
