Real estate stocks after interest rate increases: price potential of over 100 percent?

Real estate stocks after interest rate increases: price potential of over 100 percent?

According to a report by www.boerse-am-sonntag.de, the prices of real estate stocks have plummeted following rapid interest rate increases and housing price declines. Some real estate stocks now have a price potential of over 100 percent.

In the last two years, rapid price declines in interest-sensitive real estate stocks have been observed due to the global interest rate turnaround. Companies with residential real estate recorded corrections of up to 60 percent, and for commercial properties even up to 80 percent. Companies with a high proportion of debt capital in particular were treated with high price discounts on the capital market. In some cases, dire bankruptcy scenarios were priced in.

Despite these developments, there are signs that prices are bottoming out. Companies are trying to reduce debt and are succeeding by selling real estate, cutting costs and canceling dividend payouts. These measures have helped keep credit ratings stable. In addition, the capital market is even speculating on the first interest rate cuts.

An example of this is the largest German listed residential real estate company Vonovia, which has focused its strategy on consolidation. By selling real estate and halving its dividend, the company was able to reduce debt and keep its credit rating stable.

Although the prices of real estate shares are not yet approaching their book values, market leader Vonovia has price potential of over 100 percent. This could suggest that the industry's swan song has been premature.

Overall, these developments show that real estate stocks may be poised for a recovery despite previous price losses. Companies' strategies to reduce debt and cut costs have helped boost confidence in capital markets. It remains to be seen how prices will develop further, but the potential for a recovery is there.