Real estate stocks 2022 - restrained sentiment among analysts despite significant price decline in German real estate stocks

• Analyst sentiment falls significantly to 4.5 points (2021: 46.9 points)
• Analysts' outlook for commercial property stocks (-9.1 points) is worse than for residential property stocks (-2.3 points)
• IR managers expect sideways movement in the residential and commercial segments
• The biggest challenge for the real estate industry is seen in the EU Taxonomy.

Hamburg, 21st October 2022 - The Hamburg agency for financial and corporate communication, Kirchhoff Consult AG, has published the new edition of the "Kirchhoff Real Estate Stock Sentiment Indicator". The survey was conducted for the seventh time. In the study, real estate experts were surveyed on the development prospects of real estate stocks in Germany, as well as the opportunities and challenges in the current market environment.

Klaus Rainer Kirchhoff, founder and Chairman of Kirchhoff Consult AG: "Most real estate stocks have lost significant value in recent months. The fact that the expectation for further price developments is still cautious shows that the crisis is not yet over. The policy plays a key role in this. On the one hand, an effective dampening of inflation is required to enable German project developers and their construction projects to have an attractive interest rate environment and cost-effective procurement markets. On the other hand, we need an effective strategy for quickly reducing energy costs."

The surveyed analysts are cautiously optimistic about the coming months. The basic sentiment reached 4.5 points on a scale of -100 to +100. This interrupts the positive trend of the previous surveys for the time being (2021: 46.9 points). There are different expectations between the two asset classes of residential and commercial real estate. Corporate representatives expressed their general sentiment with -2.3 points cautiously.

Real estate listed companies show significantly poorer performance in the long term than the DAX-40.

The survey results fit into the picture that is emerging in the capital market for real estate AGs. Real estate stocks are currently in a correction phase with significantly poorer price trends. In the past three years, RX Real Estate Index stocks have fallen by an average of 55 percent - much more than the DAX-40. The decline of around 45 percent in the past six months also confirms the negative trend.

Stefan Scharff, founder and managing director of SRC-Research: "The dynamics of the real estate industry have become significantly more intense in recent months and pose great challenges for market participants. Nevertheless, the changes also open up new investment opportunities. To recognize and seize these opportunities, stock selection is more important than ever."

Outlook for German residential real estate stocks is assessed as clouded in the short term and positive in the medium term

The sentiment of the surveyed analysts has dimmed for residential real estate stocks. The sentiment indicator is slightly negative at -2.3 points (2021: 27.8 points). IR managers are cautiously optimistic with 11.4 points. Overall, the environment in the residential real estate segment can be considered intact.

In the medium term, however, the sentiment indicator shows a positive value of 4.5 points among analysts (2021: 27.8 points). The difference to the last survey is significant at almost 23 points. The sentiment indicator for IR managers is 31.8 points and much more optimistic.

Sideways movement of prices expected for commercial real estate stocks

Analysts view the potential for commercial real estate stocks more negatively than residential real estate stocks. The value has dropped significantly to -9.1 points compared to the previous survey (2021: 22.2 points). The sentiment indicator of IR managers is also negative, at -4.5 points. Compared to the previous survey, the sentiment for commercial real estate stocks has fallen significantly in both the short-term and medium-term scenarios. A majority of respondents expect a continued sideways trend.

Analysts and IR executives see significant challenges in the EU Taxonomy

For the first time, analysts and IR executives were surveyed on their assessments of the importance of ESG factors for the long-term success of real estate companies and the biggest challenges for the real estate industry. The results showed considerable congruence. 60 percent of the surveyed analysts and company representatives rated the importance of ESG factors as rather important in the medium term and important in the long term. There was also significant agreement among analysts and company representatives regarding the biggest challenges for the real estate industry, with 93 percent of respondents identifying the EU Taxonomy as the biggest challenge.

Jens Hecht, CEO of Kirchhoff Consult AG: "Unexpected events such as the Russia-Ukraine conflict, rising inflation, and high price increases for energy and raw materials pose significant challenges for companies. Real estate listed companies in particular must communicate clearly which strategies and measures can be taken to achieve further value creation in this environment."/p>

Further information

The complete study with all results is available for download as a PDF on our company website.