About 80 percent of speculators from the prefecture-level city in southeastern Zhejiang have been trapped by their property investments that have recently depreciated 30 to 50 percent from levels in 2010, state media reported.
"They will be insolvent either selling the houses or holding them," China National Radio said.
Their speculative activities domestically have been blamed for soaring real estate prices in China, where they have been nicknamed "locusts."
Hot money poured into the burgeoning real estate industry as a result of an investment of 900 billion yuan (HK$1.11 trillion) out of the 4 trillion yuan stimulus package into the sector, amid easy borrowing in a loose credit environment. From 2007 to 2009, Wenzhou's wealthy banded together to snap up floors of houses in Shanghai, Hangzhou and other cities.
Veteran Wenzhou speculator Zhang Ming said he borrowed 30 million yuan from friends and relatives, who put up their own firms and properties to secure mortgages from banks. "In 2010, I spent 38 million yuan buying four floors of houses in Wenzhou. But now, I cannot sell them for even 20 million yuan," he lamented.
But some analysts warned of a potential credit default by the end of the year, as more than 70 percent of the funds tied up in property speculation came from underground loans and banks.