Analysis of Reassessment of Investment Value Against the Backdrop of Rental Yield Approaching Loan Interest Rates

Currently, the rental yield of 100 cities nationwide is 2.37% which is close to the provident fund loan interest rate of 2.6%. This phenomenon indicates that China’s real estate market may be ushering in an important node for reassessment of investment value. When the rental yield approaches the financing cost, the further downward space of housing prices is limited from the perspective of investment returns.

1. Yield Support Effect
   : When the rental yield is close to the loan interest rate, the net return on real estate investment is close to zero, which provides fundamental support for housing prices. Investors are unlikely to accept negative investment returns.

2. Policy Bottom Expectation
   : From search results, real estate policies are being actively adjusted, and the market expects the policy bottom has been formed or is about to be formed [1].

3. Market Transaction Stabilization
   : New housing sales area has begun to show signs of stabilization. Although Fitch predicts that the sales volume of new commercial residential buildings will still decline by 7-8% in 2026 [1], the decline has narrowed compared with the previous period.

• Obvious Valuation Advantage
  : Current P/E ratio is 7.31x, P/B ratio is 0.81x, which is at a historically low level [0]
• Strong Profitability
  : ROE reaches 12.09%, net profit margin is 43.51%, showing excellent profitability [0]
• Stable Stock Price Performance
  : 2025 YTD return is +7.82%, outperforming the market [0]
• Relatively Good Asset Quality
  : As a leading joint-stock bank, it is relatively prudent in terms of real estate risk exposure

• Extremely Compressed Valuation
  : P/B ratio is only 0.34x, at a historical low [0]
• Obvious Financial Pressure
  : ROE is -31.07%, net profit margin is -20.92%, showing operational difficulties [0]
• Sharp Decline in Stock Price
  : 2025 YTD return is -30.24%, down 39.07% in the past year [0]
• Debt Risk
  : Facing pressure of debt restructuring, market concerns about its default risk are increasing [2]

In the past, real estate investment mainly relied on expectations of housing price increases rather than rental returns. When expectations of housing price increases reverse, rental yield becomes an important consideration indicator.

1. Yield Orientation
   : Rental yield vs loan interest rate becomes a key reference for investment decisions
2. Value Discovery
   : Low valuation and high dividends become the main investment themes
3. Risk Reassessment
   : Real estate risks are transmitted to banks, but high-quality banks have risk resistance capabilities

• Relative Certainty
  : Bank stocks have relatively certain investment value in the current environment
• Valuation Repair Space
  : High-quality bank stocks such as China Merchants Bank have room for valuation repair
• Defensive Characteristics
  : During the real estate adjustment period, bank stocks have good defensive properties

• High Risks
  : The overall industry risk is still high, requiring cautious selection
• Increasing Differentiation
  : The differentiation between high-quality real estate enterprises and problematic ones will further intensify
• Policy Dependence
  : Investment opportunities are highly dependent on the intensity of policy support

1. Policy Uncertainty
   : Adjustments to real estate policies may affect market expectations
2. Impact of Economic Cycle
   : Macroeconomic downward pressure may affect bank asset quality
3. Recovery of Market Confidence
   : Recovery of confidence in the real estate market takes time
4. Debt Risk Transmission
   : Real estate debt risks may further transmit to the financial system

The rental yield approaching loan interest rates does mark a node for reassessment of investment value, but this reassessment shows significant differentiation between bank stocks and real estate stocks. Bank stocks, especially high-quality banks like China Merchants Bank, already have good investment value and defensive characteristics; while real estate stocks have extremely low valuations, their risks are still high, and investment requires more cautious and selective strategies.

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[0] Gilin API Data - Overview, Stock Price Performance, and Financial Indicators of China Merchants Bank and Vanke A
[1] Yahoo Finance - Fitch Predicts China’s Real Estate Sales Will Continue to Decline in 2026
[2] Bloomberg - Reports on Debt Restructuring of China Vanke