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A house under construction: Real estate prices could continue to fall.
© Helmut Fohringer / dpa
The CFO and co-head of TAG Immobilien, Martin Thiel, makes people sit up and take notice with clear statements.
The real estate sector is expecting a further decline in the value of its holdings.
Düsseldorf - The housing companies hit by the real estate crisis could face a further decline in the value of their holdings, which have already been affected by billions in devaluations.
“We expect further valuation losses,” said Martin Thiel, CFO and co-head of the TAG Immobilien group, to the Reuters news agency.
Compared to the all-time highs from summer 2022, there could be a “reduction in the value of the (…) housing portfolio in Germany of 20 percent” by summer 2024.
But precautions would also have to be taken for a decline in values of 30 percent - “you simply have to have the buffer now”.
Thiel's statements are explosive for the entire industry - competitors such as LEG Immobilien and industry leader Vonovia also had to significantly devalue their holdings last year.
Vonovia, for example, posted a loss of around 3.8 billion euros at the end of September.
Difficult times for real estate companies
Rapidly rising interest rates from the ECB, skyrocketing construction costs, high inflation and a lack of large transactions have caused problems for real estate groups that have been spoiled by growth for years.
Numerous project developers were already in trouble as a result of the crisis last year.
The housing companies are holding on to their money during the crisis; in the past they had financed their expansion with large loans.
There is hardly any investment in new apartments anymore.
A further decline in residential property prices could hit companies hard - as more billions in value could then disappear into thin air.
However, Vonovia boss Rolf Buch does not expect any significant devaluations in the current year.
The market has apparently reached its lowest point, Buch, whose group has a portfolio of almost 550,000 apartments, told Reuters.
Interest rates have reached their peak, rental growth is accelerating and potential buyers are showing more interest again.
As in a Formula 1 race, Vonovia will soon reach the end of the curve and then be able to accelerate again.
“This moment is getting closer - but at the moment we are still on the brakes,” he concluded.
“Market will not implode”
At Vonovia, the loss resulting from the devaluation totaled 6.4 billion euros in the first half of 2023.
At that time, Vonovia had to reduce the market value of its real estate portfolio by almost seven percent, so far the total has been around ten percent.
Devaluations also drive up the debt ratio (LTV) of corporations.
This in turn is the central key figure when obtaining loans and their conditions.
Lars von Lackum, head of the smaller competitor LEG Immobilien with almost 170,000 apartments, does not expect devaluations of up to 30 percent.
He does not expect this to happen in the German residential real estate market.
“The market will not implode,” he told Reuters.
LEG will also sell some real estate packages in 2024.
But she is not under any pressure to act.
“The transaction market is incredibly difficult,” complained TAG co-boss Thiel: “You hardly see any large transactions.” But he also sees no pressure to sell for his company.
According to a survey by the consulting firm EY, Vonovia handled the four largest residential real estate transactions in Germany in 2023 - all sales.
The Bochum group, LEG and other housing groups will now make public in their annual financial statements whether they had to absorb further reductions in the value of their properties at the end of 2023 - and what expectations they have for 2024.
Maybe it will then become clearer when Buch can step on the gas again.
(Reuters, lf)