Systematic Assessment of Investment Opportunities in China's Real Estate Market

Based on the authoritative data I collected and in-depth analysis, I will systematically assess the investment opportunities in China’s real estate market from four dimensions: investment value, policy environment, rental returns, and future prospects.

According to the latest data from the National Bureau of Statistics, China’s real estate market was still in a deep adjustment period from January to November 2025 [1]:

• Development investment
  : 7.8591 trillion yuan, down 15.9% year-on-year
• Residential investment
  : 6.0432 trillion yuan, down 15.0% year-on-year
• New construction area
  : down 20.5%, indicating a significant contraction on the supply side
• Sales area
  : down 7.8%, weak demand side
• National Real Estate Climate Index
  : 91.90, still at a low level

Ni Hong, Minister of Housing and Urban-Rural Development of China, clearly stated in an article in People’s Daily that he will promote “the real estate industry from the stage of high-speed growth to the stage of high-quality development” [2], indicating that the policy direction has shifted from strict regulation to supporting stable development.

Authoritative data shows that there are large differences in the actual rental yield of China’s residential properties currently [1]:

• Gross rental yield
  : about 2.1%
• Net rental yield
  : about 1.5%
• Mortgage interest rate
  : about 3% (far higher than net rental yield)

: The “rental yield above 4%” you mentioned is significantly different from the current market average, possibly due to:

1. Regional differences
   : Core areas in first-tier cities may indeed reach above 4%
2. Time differences
   : During the adjustment period with sharp housing price declines, rental yields will passively increase
3. Calculation caliber
   : Whether taxes, maintenance, vacancy and other costs are considered

Investment Channel	Expected Return Rate	Risk Level	Liquidity	Complexity
First-tier city real estate	1.5%-4.5%	Medium	Low	High
Bank fixed deposit	1.5%-2.5%	Extremely low	High	Low
Wealth management products	3%-4%	Low-medium	Medium	Medium
Stock index fund	6%-8%	High	High	Medium

: Even in first-tier cities, the investment attractiveness of real estate is not prominent compared to other channels, especially with obvious disadvantages in liquidity.

According to the 2035 long-term goal, urbanization will remain an important support for the real estate market:

• Urbanization rate target
  : expected to reach over 70% by 2035
• Population flow trend
  : population continues to concentrate in first- and second-tier cities
• Improvement demand
  : shift from “having a house to live in” to “living in a good house”

The impact of inflation environment on the real estate market is dual:

:

• Asset preservation
  : Real estate, as a physical asset, has a preservation function in an inflationary environment
• Rent increase
  : Rent levels will rise accordingly under inflation expectations
• Debt dilution
  : The actual value of fixed-rate mortgages decreases

:

• Policy tightening
  : The central bank may tighten monetary policy to curb inflation
• Purchase cost
  : Rising interest rates increase purchase costs
• Consumption capacity
  : Inflation erodes residents’ actual purchasing power

:

1. Supply-demand imbalance
   : Scarce land supply in core areas of first-tier cities
2. Net population inflow
   : High-quality talents continue to concentrate in core cities
3. Income growth
   : Upgrading of China’s economic structure leads to expansion of high-income groups
4. Internationalization level
   : First-tier cities are in line with world first-tier cities, and there is room for rent level improvement

:

1. Policy restrictions
   : The “housing is for living, not for speculation” policy will continue to be implemented
2. Alternative options
   : Diversified supply such as long-term rental apartments and affordable housing
3. Economic cycle
   : Slow economic growth will restrict the magnitude of rent increases

:

• Annualized rent growth: 5-8%
• Double rent in 5-10 years
• Moderate housing price increase,可观 overall return

:

• Annualized rent growth:2-4%
• Double rent in 10-15 years
• Housing prices are basically stable, mainly relying on rental returns

:

• Annualized rent growth:0-2%
• Double rent takes more than 20 years
• Housing prices may continue to adjust, overall return is negative

###5.1 Short-term Strategy (1-2 years)

• Cautious wait-and-see
  : Wait for market stabilization signals
• Focus on policies
  : Key monitoring of mortgage interest rate changes and purchase policy adjustments
• Liquidity preparation
  : Maintain sufficient cash flow, avoid excessive leverage

###5.2 Medium-term Strategy (3-5 years)

• Core area priority
  : Core areas of first-tier cities have strong anti-drop properties
• Rental cash flow
  : Focus on rental yield rather than housing price increase
• Diversified allocation
  : Real estate investment should not exceed 30% of total assets

###5.3 Long-term Strategy (more than 5 years)

• Hold high-quality assets
  : High-quality properties in core areas still have long-term value
• Continuous optimization
  : Regularly evaluate the investment portfolio and adjust allocation in a timely manner
• Focus on alternatives
  : Diversified investment tools such as REITs and real estate funds

###6.1 Investment Value Assessment

: China’s real estate market has entered a deep adjustment period, and some core areas in first-tier cities have medium- to long-term investment value, but rational expectations are needed, and a 4% rental yield is already a relatively high level in the current environment.

###6.2 Key Risk Tips

1. Liquidity risk
   : Real estate investment lacks liquidity and needs long-term holding
2. Policy risk
   : Real estate regulation policies may be adjusted at any time
3. Market risk
   : Housing prices still have room for adjustment, and short-term volatility risk is large
4. Leverage risk
   : Excessive use of financial leverage will amplify investment risks

###6.3 Final Recommendations
For ordinary investors, it is recommended to:

1. Control position
   : Real estate investment accounts for 20-30% of total assets
2. Priority selection
   : High-quality properties in core areas of first-tier cities and along rail transit lines
3. Long-term holding
   : Plan with an investment cycle of more than 10 years
4. Cash flow priority
   : Focus on rental yield rather than short-term price fluctuations

: There are indeed investment opportunities in China’s real estate market, but more professional judgment and longer investment cycles are needed. Compared to pursuing rapid appreciation, it is more suitable as an allocation option for asset preservation and stable cash flow.

[1] Jinling AI Data - National Bureau of Statistics Real Estate Market Data and Rental Yield Analysis
[2] Lianhe Zaobao (Singapore) - Chinese Officials: In the Long Run, China’s Real Estate Development Still Has Great Potential Space (https://www.zaobao.com.sg/realtime/china/story20251216-7971020)
[3] Yahoo Finance - Analysis of Gross Rental Yield of China’s Residential Properties (https://hk.finance.yahoo.com/news/大行-傳住建部擬推全國性房貸補貼提振樓市-里昂-措施成效存疑-014818828.html)
[4] The New York Times Chinese Edition - Five Years Later, China’s Real Estate Crisis Still Has No End (https://cn.nytimes.com/business/20250825/china-property-downturn/)
[5] Article by Ni Hong, Minister of Housing and Urban-Rural Development, in People’s Daily - Grant Municipal Governments Autonomy in Housing Market Regulation, Adjust and Optimize Policies According to Local Conditions (https://hk.finance.yahoo.com/news/住建部部長-予市政府房市調控自主權-因地制宜調整優化政策-000619130.html)