On February 10, the People's Bank of China released its China Monetary Policy Execution Report for the Fourth Quarter of 2025. The report outlined monetary policy operations for 2025, emphasizing support for the stable and healthy development of the real estate sector. It highlighted the steady implementation of the relending facility for affordable housing. Furthermore, management of the Pledged Supplementary Lending (PSL) program was optimized to support policy and development financial institutions in providing credit for affordable housing projects, urban village renovation, and the construction of dual-use public infrastructure facilities. The outstanding balance of PSL reached 1.0 trillion yuan by the end of 2025.
The relending facility for affordable housing was established in 2024 to incentivize banks to extend loans supporting local state-owned enterprises in acquiring existing commercial housing stock for use as affordable housing. Throughout 2025, the People's Bank of China implemented multiple optimizations to this facility. In May 2025, the central bank decided to lower the relending interest rate by 0.25 percentage points. Subsequently, in July, it issued a notice to broaden the scope of the relending facility, enhancing coordination with relevant departmental policies, granting local governments greater autonomy, and accelerating the reduction of existing commercial housing inventory.
From a supply-side perspective, monetary policy in 2025 was precisely targeted through政策性 tools, mobilizing trillions of yuan in funding for affordable housing and urban village renovation. The steady implementation of the affordable housing relending facility and optimized PSL management effectively improved the efficiency of project execution for urban village renewal. Simultaneously, the improved financing environment led to an increasing success rate for debt extensions and restructuring of financially distressed developers, gradually containing systemic liquidity risks within the sector.
According to the report, the interest rates for newly issued corporate loans and newly issued individual housing loans were both approximately 3.1% in December 2025. This represents a decline of 2.5 and 2.7 percentage points, respectively, since the second half of 2018.
From a demand-side perspective, the dual reduction in mortgage rates and down-payment ratios in 2025 significantly lowered home purchase costs. This notably increased the willingness of both first-time homebuyers and those seeking housing upgrades to enter the market. Guidance from the People's Bank of China encouraged the implementation of more flexible credit policies across regions, with moderate easing in core cities and more comprehensive easing in numerous smaller cities, leading to an overall improvement in market sentiment.
In the section outlining the main direction for the next phase of monetary policy, the report specified a focus on ensuring the effective implementation of financial policy measures, including the relending facility for affordable housing. It also emphasized improving the foundational financial systems for real estate to help establish a new development model for the sector.
Analysis of policy dynamics in January of the current year suggests significant potential for further financial support to the real estate market. For instance, pilot programs in Shanghai involving state-owned enterprises acquiring older, smaller二手房 directly involve a need for financial backing. Looking ahead, Real Estate Investment Trusts (REITs) could provide capital for revitalizing existing real estate assets, while increased investment from social capital in related areas should be encouraged.