Analysis of China's Housing Price Bottom and Valuation Repair of Bank and Real Estate Stocks

According to the analysis mentioned, the current rental yield of 100 cities has reached 2.37%, close to the provident fund loan rate of 2.6%, which forms an important support level for housing prices. From an investment logic perspective, when rental yields approach financing costs, the investment value of real estate begins to emerge, and there is limited room for further sharp declines.

Online searches show that China is considering new real estate stimulus measures, including providing national mortgage subsidies for first-time homebuyers, increasing income tax credits for mortgage borrowers, and reducing housing transaction costs [1]. If these policies can be implemented, they will provide important support for market confidence.

Although the new commercial housing price index for 70 large and medium-sized cities has fallen for 29 consecutive months, with the year-on-year decline widening to 2.4% in November [2], the slowdown in the rate of decline itself may indicate that the market is approaching a bottom.

Vanke, once an industry benchmark, is currently facing severe challenges:

• Record loss of RMB 49.5 billion in 2024 [1]
• Recently, its request for a 2 billion yuan domestic bond extension was opposed by creditors [3]
• Extremely poor stock price performance: down 31.36% year-to-date, and a 3-year drop of up to 74.48% [0]
• P/B ratio is only 0.33x, reflecting extremely pessimistic market expectations

Although China Merchants Bank, as a high-quality bank stock, has performed relatively well (up 8.57% year-to-date) [0], the continued downturn in the real estate industry poses a potential threat to the banking system, especially the risk exposure of real estate development loans.

• Obvious Valuation Advantage
  : P/E is only 7.10x, P/B is only 0.82x, at a historical low [0]
• Financial Stability
  : ROE of 12.09% and net profit margin of 43.51% show excellent profitability [0]
• Risk Control
  : Financial analysis shows a conservative accounting approach with moderate debt risk [0]

As can be seen from the chart above, since 2024, China Merchants Bank’s stock price has shown an upward trend, rising by 51.56% cumulatively, while Vanke A has plummeted by 52.02%, indicating the market’s differentiated judgment on the two.

• Potential for Oversold Rebound
  : P/B is only 0.33x, far below the reasonable level; if the industry bottoms out and rebounds, there is huge room for repair
• Survival is Key
  : The current top priority is to resolve debt issues and avoid default risks
• Benefit from Industry Consolidation
  : As one of the few surviving large developers, it may benefit from increased industry concentration in the long term

• China Merchants Bank is relatively safe, benefiting from valuation repair and falling interest rates
• Vanke A still faces uncertainty; need to wait for debt issues to become clear

• If housing prices truly bottom out, bank stocks will see a valuation revaluation trend
• The differentiation of real estate stocks will intensify, and leading enterprises have opportunities for excess returns

1. Policy Implementation Risk
   : The specific implementation effect of stimulus policies is uncertain
2. Economic Growth Slowdown
   : May affect residents’ ability and willingness to buy houses
3. Bank Asset Quality
   : Real estate loan risks may be further exposed
4. Industry Pattern Reshaping
   : The structural adjustment of the real estate market may take longer than expected

Based on the technical support of rental yields nearing financing costs and positive changes in policy, China’s housing prices may indeed be approaching a phased bottom. However, for bank and real estate stocks, the path and pace of valuation repair will show obvious differentiation:

• High-quality bank stocks like China Merchants Bank
  : Clear room for valuation repair and high margin of safety
• Real estate stocks like Vanke A
  : Need to first resolve survival issues before talking about valuation repair; investment risk is relatively high

Investors should reasonably allocate relevant targets based on their risk preferences and investment horizons, and avoid blind bottom-fishing.

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[0] Gilin API Data
[1] Bloomberg - “China Weighs New Property Stimulus Package as Crisis Lingers” (https://www.bloomberg.com/news/articles/2025-11-20/china-weighs-new-property-stimulus-package-as-crisis-drags-on)
[2] Yahoo Finance Hong Kong - “70 Cities’ New Home Prices Fall for 29 Consecutive Months” (https://hk.finance.yahoo.com/news/70城-手樓價連挫29個月-190600540.html)
[3] Yahoo Finance Hong Kong - “Vanke Says It Will Continue to Study and Improve Measures; Earlier Three Domestic Bond Extension Proposals Failed to Pass Voting” (https://hk.finance.yahoo.com/news/萬科表示將繼續研究完善舉措-此前境內債三項展期議案均未通過投票-025517659.html)