KIRCHHOFF SENTIMENT INDICATOR PROPERTY SHARES H2-2024

INVESTMENTS IN PROPERTY SHARES – PRICE GAINS AND OPTIMISTIC OUTLOOK

• Basic sentiment among analysts and companies rises significantly to 47.7 points (H1-2024: 15.7 points).
• Property shares have performed significantly better than the overall market in recent months.
• Analysts see the prospects for residential property stocks (65.9 points) as significantly better than for commercial property stocks (43.2 points).
• Financing environment, regulation and inflation biggest challenge for the 2025 property year.
• ESG requirements and regulation remain the biggest hurdles for the sector in the long term.

Hamburg, November 19, 2024 – The Hamburg-based communications and strategy consultancy for financial communications and ESG Kirchhoff Consult has published the eleventh edition of the ‘Kirchhoff Sentiment Indicator Property Shares’. The experts surveyed are optimistic that the prices of property shares will continue to rise in 2025. The sentiment index reached 47.7 points on a scale of -100 to +100 and is therefore significantly higher than the last survey with 15.7 points.

Jens Hecht, Managing Partner of Kirchhoff Consult: “The positive price performance of recent months shows that property shares are attracting more and more interest from investors. The results of the current issue of the sentiment indicator for property shares also fit this picture. However, the valuation of many property companies on the capital market is still significantly below the level before the start of the property crisis in 2022. Even if the signals for a continued positive development are promising, it will still be a long time before property shares reach the pre-crisis level again. “

Performance of German property shares better than the overall market
In the last six months (reporting date: 31 October 2024), the share prices of the ten largest German property portfolio holders rose by an average of 19.5%, and by 27.6% over 12 months, outperforming the DAX40 (26.6%). The strong performance of residential property companies is particularly striking, with an increase of around 32 %, while commercial property rose by 22.8 %. Nevertheless, the average valuation discount of 36.6 % compared to the net asset value (NAV) continues to illustrate the sector's catch-up potential.

Outlook for residential property remains positive
The basic sentiment for residential property shares remains at a high level. Both company representatives (45.5 points) and analysts (65.9 points) are very optimistic about the situation. With a current price increase of around 32% (reporting date: 31 October 2024) over the past twelve months, residential property shares have performed particularly well. The majority of analysts and company representatives expect share prices to rise by more than 15% in 2025. The continuing high demand for housing is one of the main drivers of this positive development.

Upswing in commercial property: bottoming out can be observed
The basic sentiment for commercial property shares is also clearly positive. The sentiment indicator reached 20.5 points among company representatives and 43.2 points among analysts. The gap to residential property shares remains high. Nevertheless, commercial property shares are now also showing a sustained positive trend. Starting from a favourable valuation level, commercial property stocks have gained an average of 22.8 % over the past twelve months. In 2025, a large proportion of the experts surveyed expect share prices to rise by 5% to 15%. It can be assumed that the favourable valuation level and the bottoming-out observed in the commercial asset class could contribute to a new dynamic for shares.

Major hurdles: Uncertain regulation and increasing ESG requirements challenge the industry
The share price is a key factor for the development of property values. A clear majority of the experts surveyed believe that the probability of a fall in prices in both asset classes is low. The outlook is therefore much more positive than in previous surveys.

Analysts and company representatives cite the financing environment, inflation and regulation as the greatest current challenges. However, it can be assumed that the crisis will continue to ease in terms of inflation and the financing environment. On the other hand, major long-term burdens represent uncertainties with regard to regulation and increasingly comprehensive ESG requirements.  According to the sector experts, residential property, warehouse/logistics and industrial property have the most attractive risk/reward profile.

Vincent Furnari, Managing Partner of Kirchhoff Consult: „The growing ESG requirements are a major challenge for the property sector. Companies that specifically integrate sustainability into their strategy strengthen their competitive position and gain advantages on the capital markets - for example by issuing green bonds.“

Further information
The study can be found under the following link (German only) https://www.kirchhoff.de/fileadmin/static/pdfs/2024_news/20241119-H2_Immostudie_KC.pdf.

SURVEY METHODOLGY
The “Kirchhoff Sentiment Indicator Property Shares” from Kirchhoff Consult is the sentiment indicator for the German property share market. Kirchhoff Consult regularly asks the most important property analysts and investor relations managers of listed German property companies how they expect the property share market to develop over the next three or twelve months. The survey also asks separately about the performance of commercial and residential property shares. The analysts and investor relations managers can answer on a scale from +2 (strong rise, over +15 per cent) to -2 (strong fall, below -15 per cent). A value of “0” means that no or only very minor changes (+/-5 per cent) are expected. The evaluation reflects the average of all assessments. A total of 19 experts took part in the study (12 analysts; 7 company representatives).

ABOUT KIRCHHOFF CONSULT GMBH
With around 70 employees, Kirchhoff Consult is a leading communications and strategy consultancy for financial communications and ESG in German-speaking countries. For more than 30 years, Kirchhoff has been advising clients on all aspects of financial and corporate communications, annual and sustainability reports, IPOs, investor relations and ESG and sustainability communications. 'Designing Sustainable Value': Kirchhoff combines content expertise with excellent design to create sustainable value.

Kirchhoff Consult is a member of TEAM FARNER, a European alliance of partner-led agencies. The common goal: to build the European market leader for integrated communications consulting.

Learn more on: kirchhoff.de

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