Brexit and Germany’s new rent laws pull down EPRA listed sector values

Ongoing uncertainty about Brexit on the one hand, and dismay at the drastic political measures in Germany to curb rent and price increases, took their toll on the respective listed property markets in the UK and Germany, dragging the value of Europe’s listed real estate sector down by 1.3% to €437bn in Q2, compared to the previous quarter.

The latest quarterly Total Markets Table, a detailed analysis of all of Europe’s publicly listed real estate markets published by the European Public Real Estate Association’s (EPRA), showed that overall the market shrank by $6.3bn thanks to negative developments in Europe’s two biggest real estate markets, the UK and Germany.

EPRA’s research evaluates the total market capitalisation of listed real estate across all European markets. The latest quarterly reading saw more than $4bn (-4.5%) wiped off the value of listed property in the UK, while Germany’s fell by exactly $8bn (-7.1%).

Germany, which overtook the UK two years ago as having the largest listed sector in Europe, now makes up $104.9bn of the European listed real estate market, followed by the UK in second with $87.5bn and France in third with $63.2bn.

Ali Zaidi, EPRA’s director of research and indexes, said in trade publication IPE that Germany’s residential market took a major hit in value terms in Q2, mainly due to the discussions around rent control laws. This wiped more than 7% off the value of Germany’s wider listed property sector in this period, he said.

“Earlier in the year, the UK’s commercial property market looked as if it could rally in the short term. However, renewed uncertainty, particularly in the race for the premiership in Q2, has seen the value of property shares fall and caused additional pressure that will likely cause the market’s significant discount to persist,” Zaidi said.

Zaidi said Europe’s listed sector has fallen in the last quarter, but the overall picture for Europe is actually one of marginal growth.

“The UK and Germany are the two most influential markets in value terms, and both are experiencing specific political conditions that have negatively impacted investor sentiment, disproportionately affecting the value of the wider European market.”