Global Real Estate and REITs: Values, Yields, Distress — 2026-09-19

Top developments

South Korea PF delinquencies spike to 10-year high

The delinquency rate for real estate Project Financing (PF) loans in South Korea reached 4.65% in March, marking a 10-year high. This surge is driven by a 15.6% increase in overdue loans at savings banks over the past six months, signaling severe stress in the second-tier financial sector.

Korea launches 3 trillion won PF normalization fund

In response to the crisis, South Korea’s Financial Services Commission announced a 3 trillion won fund to normalize stalled PF projects. The initiative involves equal participation from government and private capital, targeting residential projects to supply approximately 18,000 housing units by revitalizing delayed construction sites.

Vonovia faces valuation pressure from rising bond yields

German real estate giant Vonovia saw its stock drop 27% year-to-date as rising financing costs and higher bond yields force a revaluation of its assets. The company confirmed its 2026 EBITDA target but acknowledged that declining cash flow and increased borrowing costs are putting significant pressure on property valuations.

US CMBS delinquency stabilizes but office stress persists

While the overall US CMBS delinquency rate decreased slightly to 7.35% in June due to lodging cures, office sector distress remains critical. The office CMBS delinquency rate had previously hit an all-time high of 12.34% in January 2026, indicating that capital recovery in commercial real estate remains uneven and highly asset-specific.

Local view

South Korea (Seoul Economic Daily): Local media highlight the "weak link" of PF loans, noting that while major banks are stable, savings banks are bearing the brunt of the delinquency surge. The Financial Supervisory Service is actively facilitating "package support" for stalled residential PF projects, moving from bridge loans to completion financing to prevent further defaults.

Germany (Handelsblatt): Coverage focuses on the political risk facing Vonovia in Berlin, where a proposed socialization of housing units threatens the company's €23 billion exposure. Despite the legal and political headwinds, Vonovia is attempting to position itself as "part of the solution" in the capital's housing crisis, though investor sentiment remains negative due to higher interest rates.

Context & numbers

• Korea PF Delinquency: 4.65% (March 2026), highest since September 2016.
• US Office CMBS Delinquency: Peaked at 12.34% in January 2026; overall CMBS rate at 7.35% in June 2026.
• Green Street Index: The Commercial Property Price Index increased by only 0.1% over the past quarter, reflecting stagnant valuations.
• Vonovia Stock: Down 27% year-to-date as of mid-September 2026.
• Singapore REIT Yields: Average dividend yield for S-REITs stands between 6.0% and 6.5%, with overseas-focused REITs offering up to 9%.

On the radar

• Korean Regulatory Support: Watch for details on the implementation of the FSS's stage-by-stage financial support programs for stalled PF projects, particularly regarding the sale of distressed assets.
• Mortgage REIT Spreads: Investors should monitor the spread on mortgage REITs with yields above 10%, which recently hit a one-year low, signaling potential dividend pressure.
• Berlin Housing Policy: The outcome of the political debate on Vonovia's potential socialization in Berlin could significantly impact European listed landlord valuations.