Vonovia shares are at the bottom of the DAX with their lowest price since 2014
VBefore the interest rate decision by the American Federal Reserve (Fed) on Wednesday, investors continued to steer clear of the real estate sector. In Europe, the Stoxx Europe 600 Real Estate sector index continued its weakness of the previous day with a discount of 2.3 percent at times and marked a low since October 2022. The pressure on the shares of the residential construction group Vonovia was particularly strong: According to a negative study by Morgan Stanley the papers came in last place in the German selection index with a discount of 4 percent at times dax. Vonovia shares fell to their lowest price since 2014. The title later lost around 3 percent to 18 euros. The price has more than halved within a year, and the minus has been around a quarter for a month.
The Dax itself rose by 0.4 percent to 15,263 points on Wednesday morning. The day before, a recovery rally among bank stocks had boosted the index by 1.8 percent. In the middle of the week, investors on the German stock market were torn between bargain hunting and profit-taking, according to the trade. Before the Fed’s interest rate decision in the evening, most investors would not dare to come out of the cover.
Morgan Stanley analyst Bart Gysens was generally cautious about continental European real estate values on Wednesday, citing the achievable returns, jeopardized rental income and often excessive debt. This increases the risk that capital increases would be necessary. Shares from Aroundtown or Grand City Properties slipped down by up to three percent in the M-Dax or S-Dax.
The share of Vonovia Gysens downgraded from “equilibrium” to “underweight” on Wednesday and cut the price target significantly from 30 to 19 euros (current price: around 18 euros). While he appreciated the fact that some companies had recently announced that they would waive dividends in order to strengthen their balance sheets, he sees a point of criticism at Vonovia here. The Bochumer would have only reduced the dividend. Gysens therefore fears that further measures would be necessary to repair the balance sheet.
On Wednesday, many investors are apparently waiting to see what course the American Federal Reserve will hit. According to market observers, some are hoping that the latest turbulence in the banking sector could tempt the monetary authorities to adopt a more moderate monetary policy, perhaps even to stand still. On the other hand, however, the Fed is under pressure to contain the high inflation with further rate hikes. Economists therefore mainly expect a further tightening of 0.25 percentage points. A stronger hike, as Fed Chairman Jerome Powell had promised before the turmoil on the markets, is now considered unlikely.
rising Interest charges fundamentally burden the real estate sector, since they generally worsen the financing conditions for companies and also on the real estate market. In addition, real estate companies have to lower their portfolio valuations, which have been inflated during the zero-interest phase.
The entire industry has therefore been on a downward slide for some time. At the end of 2021 it was Stoxx Europe 600 Real Estate is still at 200 points, it was at a low last year. A temporary recovery up to the beginning of February 2023 has recently been nullified. This year, the sector is one of the biggest losers in the industry, while the Dax 2023 is currently up 9 percent.