Impact of Rental Yield Approaching Loan Interest Rates on Valuation Repair of Real Estate and Bank Stocks

Based on my comprehensive analysis of current market data and information, I will deeply explore the impact of rental yield approaching loan interest rates on the valuation repair of real estate stocks and bank stocks.

According to market data, the gross rental yield of China’s residential properties is about 2.1-2.37%, and the net yield is about 1.5%, which is approaching the provident fund interest rate of 2.6% [1]. This convergence phenomenon has important market significance:

• The narrowing gap between rental yield and loan interest rates means improved cost-effectiveness of real estate investment
• From an investment perspective, the holding cost of real estate is relatively reduced, enhancing its asset allocation value
• The market is returning to a more rational level of investment returns

, the rental yield is gradually approaching the provident fund interest rate, with a gap of only 0.23 percentage points.

Taking Vanke A as an example, its P/B ratio is only 0.34x, P/E ratio is negative, and its stock price has fallen by nearly 40% this year [0]. This valuation level reflects the market’s extremely pessimistic expectations for the real estate industry.

1. Fundamental Improvement
   : The decline in housing prices has narrowed, and inventory is gradually being cleared
2. Policy Support
   : The government may introduce more supportive policies
3. Market Clearing
   : The worst period may have passed

Fitch Ratings predicts that China’s real estate industry may continue to contract in 2026, with new commercial residential sales falling by 7-8% [4], which means the industry recovery still needs time.

Ping An Bank currently has a P/E ratio of 5.17x, P/B ratio of 0.48x, and ROE of 8.72% [0]. Compared with real estate stocks, bank stocks have healthier fundamentals.

1. Improved Interest Rate Environment
   : The interest rate downward cycle is beneficial to banks
2. Asset Quality Expectations
   : Real estate risks are gradually being released
3. Valuation Level
   : P/E is in the range of 5-6x, at a historical low

Compared with U.S. banks, Chinese bank stocks are significantly undervalued. U.S. banks currently have a P/E ratio of 13.87x and P/B ratio of 1.35x [0], while Chinese bank stocks generally have only about half of those valuations.

• Cautiously Optimistic
  : Pay attention to policy changes and improvements in market sentiment
• Prefer Bank Stocks
  : Compared with real estate, bank stocks have lower risks
• Focus on Liquidity
  : Choose leading companies with good liquidity

• Real Estate Stock Opportunities
  : Deploy when the industry hits bottom and rebounds
• Valuation Repair Space
  : The overall repair space is expected to be between 30-50%
• Fundamentally Driven
  : Focus on performance improvements and policy support

1. Macroeconomic Risk
   : Slowdown in economic growth may affect the real estate market
2. Policy Implementation Risk
   : Policy effects may fall short of expectations
3. Industry Structural Risk
   : Severe differentiation between different regions and cities

Rental yield approaching loan interest rates does provide important support for the valuation repair of real estate and bank stocks, but this process will be gradual.

, focusing on leading enterprises with good fundamentals and liquidity.

The current valuation level does provide a good safety margin for long-term investors, but it is necessary to wait patiently for the dual improvement of market sentiment and fundamentals. The catalysts for valuation repair will come from the combined effects of policy support, interest rate decline, and stabilization of industry fundamentals.

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[0] Gilin API Data - Valuation Analysis of Real Estate and Bank Stocks
[1] Yahoo Finance - Analysis of China’s Residential Property Rental Yield and Mortgage Interest Rates
[2] Wall Street Journal - Analysis of China’s Real Estate Market Dilemma
[3] Fitch Ratings - 2026 China Real Estate Industry Forecast
[4] Bloomberg - China Real Estate Policy and Market Trend Analysis