German listed property sector sees 17% rise in market cap
Last year saw a further sizeable rise in the market value of German listed property holdings, with the market capitalisation of firms in the sector jumping fully 17.2% over the previous year to total €78.2bn, according to figures released by German Property Association ZIA.
The 'investible market capitalisation' of the sector has risen from a mere €1.5bn as recently as 2008 to fully €35.2bn in 2015, says the study, produced by ZIA together with specialist capital market research house Barkow Consulting. The study analysed 18 German listed property companies, who collectively represent 82% of the weighting of the DIMAX real estate share index.
The sector has become noticeably more visible in Germany, with the entry of Vonovia into the DAX 30 last year representing a major breakthrough. A further four companies are components of the MDAX, for mid-sized companies, while a further six are in the SDAX for smaller companies. These companies together make up 3% of the market value of the value of the leading indices, with a rising trend. Alexander Dexne, the chairman of ZIA's listed property platform, points out that this share represents the same as the listed property sector in the USA before the start of the financial crisis.
Among individual sectors, the residential sector remains far larger than commercial property focused firms. Around 1 million housing units now held by listed firms, as against 2.7m by communal housing companies. Peter Barkow of Barkow Consulting said, "The German residential property listed companies are becoming an ever more important part of the housing market, but in the commercial sector it's also becoming clear that a listing is an attractive model for real estate companies."
The capital markets as a financing instrument are becoming more prevalent, with listed property firms being responsible for 30% of total equity placements in the first half of 2015. Bonds are also playing an increasing role as a way to diversify financing, and meet high investor demand – here, Barkow counts 38 banks in Germany that have been active in placing equity capital in the real estate sector since 2009.
Barkow also highlights the change in the LTV ratios in the sector, which had fallen by 2016 to 53% from 66% in 2009. According to Dexne, "It is true that the level of debt is higher among German listed companies than the European average of 38%, but history and experience shows that listed property companies do value stable investments with high levels of their own equity, despite the extremely favourable interest rate environment at the moment."