Analysts turn negative on share prospects for listed resi companies
Over the past five years or so the German stock market has become populated with residential property companies which have ballooned in value, much against the expectations a decade ago when residential property companies were being outlawed from any participation in the nascent REITs sector.
The big companies have soared in size and market capitalisation after a long wave of mergers and consolidations within the sector. A new study by Kirchhoff Consult suggests a less rosy future for shares in the listed residential sector, while the commercial property companies are viewed in a more positive light.
The latest Stimmungsindikator Immobilen-Aktien from Kirchoff, which evaluates perspectives for share price development, saw values fall for the 2ndquarter, largely based on a fall in residential property company shares.
The barometer uses a proprietary scale of minus 100 to plus 100; in the second quarter the gauge fell from 21.4 to 8.3, with residential shares falling from plus 12.5 points to minus 8.3 points. Prospects for commercial property shares held steady at 37.5, the same as last quarter. In particular value-add is seen as having strong growth potential, while not a single analyst expects rising share price in the residential sector.
Analysts justify their views on the residential companies' past surge in values – share prices in the big companies have risen by 77% over the past three years, and by 8% over the last six months - a much faster rate than commercial property companies (up 23% in three years, and minus 1% over the last six months). 83% of the analysts surveyed expected stagnating prices, with the remaining 17% expecting falls of between 1% and 15%.
Most analysts are anticipating a sideways movement in residential company shares at best over the coming three months. Two-thirds are expecting rises in the share prices of commercial listed companies, largely as a result of strong rents in the office sector. The lack of available portfolios will hamper M&A moves, they believe, with growth coming from smaller portfolios and own project developments. Respondents also predicted at least two new IPOs over the next two years.