Since the start of the year, listed real estate companies in the euro zone have posted a negative performance despite the good performance of the stock markets. Should you take advantage of it to invest?
-4.5%: this is the performance of the IEIF Europe index, representing the evolution of the price of real estate traded on European stock exchanges since January 1, 2024. At the same time, the Euro Stoxx 50 index shows a gain of more than 10 %.
To explain investors’ current disenchantment with the sector, we just need to look at the recent rise in interest rates, indirectly impacting stone prices, as explained by Alexandre Hezez, strategist and allocator within the Richelieu Group.
How to invest in the stock market?
Indeed, listed real estate investment companies (SIIC), as specialists call them, generally go into debt to build up their assets, mainly invested in offices, businesses or even logistics platforms. If SIICs have in common with SCPIs the management of a real estate portfolio, the main difference is therefore linked to the fact that the SIIC is listed on the stock exchange. Among the best-known real estate companies are Unibail Rodamco and Socit de la Tour Eiffel.
Increase in rates and teleworking
But the tightening of credit conditions in all euro zone countries also limits the room for maneuver in the development strategy of SIICs, which impacts their profit growth prospects. Added to this is the generalization of teleworking, which reduces the space requirements of companies, which weighs on the demand for offices, specifies Laurent Saint Aubin, director of Equity management and manager of the Sofidy Selection 1 fund, within the manager Sofidy.
An attractive valuation and yield
However, some professionals consider that the consolidation of the sector on the stock market is rather severe. Indeed, the level of valuation of real estate remains attractive, with an average discount of 26% compared to the value of their net asset value (ANR), which offers investors a certain margin of security, adds Laurent Saint Aubin. And the cherry on the cake, the sector’s dividend yield in Europe is currently close to 5% for the year 2024.
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Turn to specialized funds
Nevertheless, experts recommend that investors diversify their portfolio, by positioning themselves on specialized securities in residential real estate, offices or even logistics.
In any case, it is recommended that a saver, wishing to invest in this investment theme, turn to a UCITS (undertaking for collective investment in transferable securities) specializing in real estate listed on the stock exchange. Their advantage is to spread the risk over a large number of values, including in geographical terms.
Finally, one last detail which is important: these funds, like the SIICs which compose them, are not eligible for the stock savings plan (PEA) but are eligible, however, for the unit-linked supports of life and PER (retirement savings plan).
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