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China's outstanding property loans rose to a two-year high in June, signaling intensified efforts by the government to support the struggling real estate sector. The overall loan book reached 53.33 trillion yuan, with development loans increasing slightly, while mortgage loans remained subdued. Despite this lending push, the housing market continued to show signs of weakness, with new home prices falling at the sharpest rate in eight months. The rise in loans comes at a time when Beijing is taking multiple steps to stabilize the market, including letting local governments purchase unsold homes and land from financially stressed developers.
In June, outstanding property loans surged to 53.33 trillion yuan climbing 0.4 percent from a year ago the highest level since mid 2023. This uptick was driven by new policy support aimed at revitalizing the real estate sector. Though mortgage lending remained slightly down at 37.74 trillion yuan ( 0.1 percent), loans for development projects edged up by 0.3 percent to 13.81 trillion yuan. Advertisement
Despite these lending gains, the downturn continued to weigh heavily on the housing market. In June, new home prices dropped at the steepest monthly rate seen in eight months, declining 0.3 percent signaling weak demand and ongoing price pressure. Falling investment and sluggish sales underscore the limits of policy support amid the broader slump.
Beijing has rolled out multiple measures to shore up the sector, including permitting cash strapped developers to sell completed inventory and undeveloped land to local governments. These efforts follow years of tightened borrowing standards under the "three red lines" rules first introduced in 2020 steps intended to curb excess leverage after the Evergrande and broader property crisis.
The fallout from that crisis remains significant. Starting in 2021, several major developers including Evergrande, Country Garden, Kaisa, Sunac and Fantasia defaulted on loans or bonds, leading to a broader liquidity squeeze. Many homebuyers began withholding mortgage payments in protest of stalled construction, prompting national interventions to create bailout funds and ease mortgage costs.
While property lending is stabilizing, China's economic reliance on real estate once accounting for a quarter of GDP is under strain. New home prices have declined by 20 percent since 2020, significantly reducing land sales and tax revenue for local governments. Moreover, non-performing loans tied to real estate remain a concern for banks.
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