Under-construction apartments are pictured from a building during sunset in the Shekou area of Shenzhen, Guangdong province, China November 7, 2021. Picture taken November 7, 2021.
Under-construction apartments are pictured from a building during sunset in the Shekou area of Shenzhen, Guangdong province, China November 7, 2021. Picture taken November 7, 2021. Reuters / DAVID KIRTON

Shares in embattled Chinese property developers fell on Friday as homebuyers' threats to stop mortgage payments on unfinished apartments outweighed Beijing regulators' assurance that local governments will get help to deliver property projects on time.

The regulatory comment came as threats to withhold payments for stalled property projects have proliferated in official and social media in recent weeks. That has deepened investor concerns about China's property sector, which accounts for a quarter of the world's second-biggest economy and has been a pillar of growth through the last two decades.

It wasn't immediately clear whether any homebuyers had begun acting out on threats to stop mortgage payments.

The Hang Seng Property Index, tracking a group of mainland-based property developers, fell 1.2% by the midday trading break on Friday, dragging the Hong Kong benchmark index down 1.2% also.

Among those hardest hit, shares in Longfor Group Holdings Ltd were down 4.5%, while Country Garden Holdings Co Ltd fell 5.5% by the midday break.

The drop came despite Chinese state media carrying reports late on Thursday citing an unnamed China Banking and Insurance Regulatory Commission (CBIRC) official saying the regulator will strengthen coordination with housing and construction authorities, and China's central bank, to back local administrations in "guaranteeing the delivery of homes".

Also on Thursday night, local regulators in Xi'an, a city in west China, said they would tighten oversight of escrow accounts and make sure money put down by home owners isn't transferred illegally by property developers.

A mortgage payment strike would threaten to kill a nascent recovery in China's capital-starved property sector and hit banks with hefty writedowns, analysts have warned.

"Things will get worse before they get better," said Xiaoxi Zhang, China finance analyst of Chinese research group Gavekal Dragonomics.

"China has been determined to curb the leverage (taken on) by property developers and the government will still try to refrain from providing liquidity to them in a big scale. It will take time for some more targeted measures to be issued," she said.

As property firms stocks weakened, a selloff in banking shares also gathered steam amid investor concerns that the mortgage payment halt threat may snowball if not checked in a timely manner, worsening banks' credit profiles.

In Hong Kong industry benchmark dropped 0.8% by midday.

Tommy Xie, head of Greater China research of OCBC Bank, said the mortgage repayment suspension is turning from a "liquidity crisis (for) property developers to a financial crisis", and has made it urgent for the central government to step in.