Analysis of Medium- and Long-Term Investment Value and Asset Allocation Strategy in China's Real Estate Market

Based on the latest market data and analysis, I will evaluate the medium- and long-term investment value of China’s real estate market from a professional perspective and discuss asset allocation strategies.

Since the 2021 peak, first-tier city housing prices have seen significant corrections:

• Shenzhen
  : down about 32%, the most severe adjustment
• Shanghai
  : down about 28%
• Beijing
  : down about 25%
• Guangzhou
  : down about 22%

This magnitude of adjustment has indeed digested the previous bubble to some extent, and valuations have returned to a more reasonable level.

: There is a significant difference between the 4%+ rental yield you mentioned and the actual data [0]:

• Beijing
  : 1.8%
• Shanghai
  : 2.1%
• Shenzhen
  : 2.5%
• Guangzhou
  : 2.3%

Even against the backdrop of a 40% drop from the peak, rental yields in first-tier cities are still far below the ideal level of 4%, and lack obvious advantages compared to current mortgage interest rates.

: Current mortgage rates are about 3.5-4.2%, while actual rental yields are only 1.8-2.5%, leading to a issue. Even considering future rent increases, positive cash flow is still difficult to achieve in the short term.

:

• China’s natural population growth rate in 2023 was -1.48‰, negative for two consecutive years
• Accelerated aging (14.9% of the population is over 65 years old)
• Demand in core areas of first-tier cities is indeed relatively strong
  , but total demand faces structural contraction pressure

: Price adjustments have indeed brought:

• Reduced household leverage ratio
• Eased cost pressure on enterprises
• Increased room for releasing consumption capacity
• Reduced financial system risks

: The government has clearly stated that “it will not use real estate as a short-term means to stimulate the economy”, so the logic of inflation policies driving housing price increases is constrained by policies.

:

1. Shenzhen
   : Technology innovation center, inflow of young population, strong long-term growth potential
2. Shanghai
   : International financial center, stable demand for foreign capital allocation
3. Beijing
   : Political center, high policy sensitivity
4. Guangzhou
   : Traditional commercial city, relatively stable growth

• Core areas of first-tier cities
  : High-quality assets with scarcity and good liquidity
• Focus points
  : Mature communities along subway lines, with school districts and complete commercial supporting facilities

• Core areas of strong second-tier cities
  : Cities with good economic growth such as Hangzhou, Chengdu, Wuhan, Suzhou
• Logic
  : Lower cost and relatively greater growth potential

• REITs products
  : Diversify risks and better liquidity
• Real estate trusts
  : Professional management, reducing personal management costs

• Cash and fixed income
  : Wait for a better entry opportunity
• Other assets
  : Diversified investments such as stocks and bonds

1. Policy risk
   : Expansion of real estate tax pilot may increase holding costs
2. Slowdown in economic growth
   : Affects residents’ income and home purchase ability
3. Oversupply
   : Some cities still face pressure to destock inventory

1. Population structure change
   : Aging trend is irreversible
2. Peak urbanization rate
   : Limited growth space
3. Rise of alternative assets
   : Other investment channels divert funds

• Allocation ratio
  : No more than 15-20% of total assets
• Timing entry
  : Wait for clearer policy shift signals
• Key focus
  : Core assets with reasonable price-to-rent ratio and good liquidity

• Allocation ratio
  : 20-30%
• Batch position building
  : Gradually allocate using market fluctuations
• Geographical diversification
  : Gradient allocation across different cities

• Allocation ratio
  : 30-40%
• Value investment
  : Seek opportunities that are oversold but have good fundamentals
• Active management
  : Regularly adjust allocation ratios

China’s real estate market

, but :

1. Core areas of first-tier cities
   still have relatively stable investment value, but need to accept relatively low rental yields
2. The expectation of 4% rental yield is overly optimistic
   , the actual level is about 2-2.5%
3. The statement of “Silver 15-year slow bull” is overly optimistic
   , and it is more likely to be a pattern of
   structural differentiation and slow recovery
4. Asset allocation should be cautious
   , and the proportion of real estate in the investment portfolio needs to be reasonably controlled

: Based on current data, it is recommended to adopt a strategy of , focusing on high-quality assets in core areas of first-tier cities and preparing for long-term holding.

[0] Jinling AI Data - China Real Estate Market Analysis Data
[1] Bloomberg - “UBS’s China Property Optimist Now Foresees an Extended Slump” (https://www.bloomberg.com/news/articles/2025-11-24/ubs-s-china-property-optimist-now-foresees-an-extended-slump)
[2] Yahoo Finance - “Fitch expects office rental environment in mainland China and Hong Kong to still face challenges next year” (https://hk.finance.yahoo.com/news/惠譽料明年内地及香港租賃環境仍面臨挑戰-063939149.html)
[3] BOCOM International - “Mainland China’s property market continued to adjust in November; expects stable market next year” (https://hk.finance.yahoo.com/news/交銀國際-11月內地樓市延續調整態勢-料明年市場保持穩定-030054516.html)
[4] Bloomberg - “China Vows to Stabilize Property Market as Crisis Deepens” (https://www.bloomberg.com/news/articles/2025-12-11/china-vows-to-stabilize-home-market-as-property-crisis-deepens)