(This story from August 14 is corrected to remove the inaccurate sentence in quotes in the 22nd paragraph)

BEIJING (Reuters) – Not yet 30, Beijing office worker Li believed she was already climbing the ladder of private property in China with two apartments bought and rented. Then came the new coronavirus, jobless tenants leaving the city and lower rents.

She is one of millions of Chinese homeowners who have bought apartments for rent on a highway to the country’s growing middle class, many now facing a first drop in rental income.

Analysts say there is little chance of widespread defaults just yet and that house prices continue to rise, albeit more slowly. But the rental problems underscore China’s economic fragility, with legions of homeowners having already cut spending amid their gloom.

Li, who declined to give her full name, said she had to almost halve the rent in one of her apartments between February and May to hang on to a tenant, while her own salary was reduced by 25% as his employer reduced coronaviruses.

“I have to pay the rent for my room in Beijing and the monthly mortgages for the two apartments,” she said.

Rents in 20 major cities fell 2.33% in July from the same month a year earlier, according to real estate data provider Zhuge House Hunter – the fourth consecutive month of decline in a buoyant market in years.

The area remains opaque with no national database showing who owns which buildings and limited historical monitoring data.

For a graph of average house rental prices in Mainland China:

DEFERRED CONSUMPTION

Amid pressure on China’s service and manufacturing sectors by the spread of COVID-19 earlier this year, the first to be laid off were migrant workers, the main takers of small rental apartments.

White-collar workers followed, while new university graduates from provinces who would normally flock to cities have struggled to find jobs. All of this weighed on consumption by both renters and homeowners with deeper pockets.

Even the demand for short-term housing has declined, depriving homeowners of an alternative. In June, the number of Chinese properties that had at least one night booked fell 29% from the previous year, according to data from analytics firm AirDNA, which tracks bookings on Airbnb and Vrbo.

“Two groups (…) are suffering the most,” said Yuan Chengjian, vice president of Zhuge House Hunter. “One is made up of long-term rental companies… the other is made up of investors who buy properties with high leveraged financing because they pay off part of their mortgages with the rent.”

Luo Shuzhen, 50, with 80 rooms to sublet in two buildings in the southern industrial city of Dongguan, said the number of tenants has fallen by 30% this year. She is now postponing her plan to furnish an apartment she bought last year.

“It’s hard to say how long the outbreak would last, so I’m not sure I can keep the rental business going into the second half of the year,” said Luo, who runs a convenience store.

For a graph on short-term house rentals in China:

DEFAULT VALUE

Like Luo, other owners Reuters spoke to were looking to cut spending. China’s retail sales fell for the seventh month in July, according to official data released on Friday.

But mortgage defaults remain rare for now: China’s overall NPL ratio stood at just 2.1% on average at the end of June.

Regulators aren’t giving a breakdown on soured mortgages, but China’s residential mortgage-backed securities (RMBS) market offers a clue on the trends.

About 3% of mortgages are securitized by banks, and late payments on some securitized mortgages increased slightly earlier this year, although defaults remained below 0.10% of outstanding mortgages.

“Half of transactions in the securitization market use 90 days as the definition of default, while the other half use 180 days,” said Tracy Wan, senior director of Asia-Pacific structured finance at Fitch Ratings. “For those using 180 days, you would have more time to recognize the defaults.”

For Li, a Beijing office worker, now is the time to ask for help keeping her real estate dreams in one piece.

“I even asked my dad for help – and I’m almost 30! she said.