German real estate cash fears are overdone, Deutsche Bank says

BELEAGUERED German real estate stocks are getting a vote of confidence from Deutsche Bank.

Residential firms will likely get through the downward cycle in house prices without having to raise capital, analyst Thomas Rothaeusler wrote in a note, turning more positive on the stocks. His view is in contrast with peers at Stifel Nicolaus & Co, who said this month the industry faces “potentially enormous” rights issues as asset values sink.

A slump in German property prices and a subsequent jump in loan-to-value ratios have spurred worries about refinancing, making real estate the worst-performing sector in Europe in the past year. Deutsche Bank said there’s a good chance house prices will stabilise in the second half of 2023, and predicts German residential values won’t drop more than 20 per cent from peak to trough.

Rothaeusler pointed to data from property listings website Immocscout, which suggests a recovery in house prices driven by growth in the rental market. Meanwhile, LEG Immobilien’s upgraded rental growth guidance indicates “higher market dynamics,” the analyst said in a note. He upgraded Vonovia to buy from hold and raised TAG Immobilien to hold from sell. BLOOMBERG