The Hamburg-based financial communications consultancy Kirchhoff Consult has just published its sixth half-yearly report on analyst and IR sentiment in Germany's real estate listed sector. The underlying pointers are essentially optimistic, with analysts' assessment of the health of the sector now back at the level it was at the end of H2-2019, before the onset of the corona pandemic.
Not altogether surprising, perhaps, as Germany's leading DAX indices have been hitting all-time highs recently, but useful as a guide to sectors in favour. The Kirchhoff Sentiment Barometer covers German and Austrian listed commercial and residential property companies.
Over the last twelve months, shares of the leading ten listed German real estate companies have lost 20% on average, whereas the DAX 30 has more than recovered after its big dip in March last year. At an average discount of 30% to NAV, the sector has fallen disproportionally out of favour.
At a reading of 46.9 points, sentiment is just slightly below the 49.4 points at the end of 2019, the last time the survey was carried out. (The scale runs from -100 to +100). A year on from the onset of COVID, 67% of the analysts and 73% of the real estate company representatives surveyed described the mood in real estate capital markets as 'positive'
However, there has been a shift in attitudes towards residential listed companies at the expense of commercial property companies. According to founder and CEO Klaus Rainer Kirchhoff, "For the first time since our survey was conducted, sentiment for residential equities is more positive than for commercial equities. The COVID-19 pandemic has left its mark on shopping center operators and the commercial real estate sector in particular. As to future share price development, German policy has a key role to play. On the one hand, effective pandemic control is needed to help German city centers and their shopping centers regain their strength. On the other hand, we need a balanced and stringent housing market policy to provide investors with reliable investment conditions."
The turnaround in sentiment for the German residential segment has been noticeable.. Whereas the indicator value for mid-2019 had still been in the negative, it now stands at 27.8. Despite the housing policy being assessed as "erratic", 56% of analysts view a price increase of 5% or more 'likely' for residential shares in the coming twelve months. They also view commercial property company shares as likely to rise by at least the same amount.
In commercial property, the poor outlook for retail AGs is weighing down overall prospects. While forecasts for office or logistics do remain positive, the overall sentiment score for the sector has fallen somewhat among analysts since mid-2019 (from 27.8 to 22.2 points).
