China's real estate market is navigating a pivotal transition toward more sustainable growth, with early signs of stabilization emerging as policy support gains traction and market confidence gradually strengthens.

While the sector's adjustment has weighed on home sales and mortgage demand, the moderation in lending reflects a broader shift toward improved asset quality and more prudent risk management.

Against this backdrop, annual reports from listed banks show that by the end of 2025, the combined outstanding balance of residential mortgages at China's six largest State-owned commercial lenders stood at about 24.48 trillion yuan ($3.6 trillion), down 711.52 billion yuan from the end of 2024, a year-on-year decline of 2.82 percent.

Among them, the outstanding balance of residential mortgages at Industrial and Commercial Bank of China fell by 207.31 billion yuan to 5.88 trillion yuan; China Construction Bank declined by 196.53 billion yuan to 5.99 trillion yuan; Agricultural Bank of China dropped by 168.24 billion yuan to 4.82 trillion yuan; Bank of China declined by 106.48 billion yuan to 3.98 trillion yuan; Bank of Communications fell by 24.15 billion yuan to 1.44 trillion yuan; and Postal Savings Bank of China decreased by 8.81 billion yuan to 2.37 trillion yuan.

These six major banks are the backbone of China's mortgage lending market. According to the People's Bank of China, the country's central bank, the outstanding balance of residential mortgages across financial institutions stood at 37.01 trillion yuan at the end of the fourth quarter of 2025, down 1.8 percent year-on-year, with a full-year decrease of 676.8 billion yuan.

All six banks reported negative growth in mortgage balances last year, though to varying degrees. The smallest decline was at PSBC (0.37 percent), followed by BOCOM (1.65 percent) and BOC (2.6 percent), while larger declines were seen at ICBC (3.41 percent), ABC (3.38 percent) and CCB (3.18 percent).

Xue Hongyan, a special researcher at Jiangsu Su Merchants Bank, said the decline in mortgage balances is a natural result of the real estate cycle adjustment, reflecting both weak demand for new mortgages and the runoff of existing loans.

Wang Pengbo, chief analyst at market consultancy Botong Analysys, echoed this view, noting that the decline was driven by a combination of early mortgage repayments by households and subdued homebuying demand last year.

Affected by macroeconomic conditions and the downturn in the property sector, nonperforming mortgage loan ratios have generally risen across the banking industry. By the end of 2025, among the six largest State-owned commercial lenders, only BOC saw its nonperforming mortgage loan ratio edge down by 0.01 percentage point to 0.6 percent, while the other five recorded increases. ICBC's ratio rose by 0.33 percentage point to 1.06 percent, and BOCOM's ratio increased by 0.43 percentage point to 1.01 percent.

Wang Jingwu, senior executive vice-president of ICBC, said that amid economic restructuring, property market adjustment and temporary imbalances between supply and demand, the bank's nonperforming residential mortgage loan ratio has entered a short-term upward trend, which is broadly in line with the banking industry-wide trend.

However, he emphasized that China's economic fundamentals remain solid, with strong resilience and significant potential, and that the long-term positive outlook remains unchanged. Risks in personal lending are therefore manageable. He added that ICBC is closely monitoring real estate market trends and implementing national policies aimed at establishing a new development model for the property sector, promoting better housing and stabilizing the market.