PwC‘s Real Estate Institute
Our PwC Real Estate Monitor provides you with a range of monthly derived Real Estate Capital Market KPIs. Our analyses are based on major listed German Real Estate Companies and provide you with sound insights into developments in the real estate industry.
With more than 20 percent of national income before the automotive and engineering industries, the real estate industry is one of the largest economic sectors in Germany. The dynamic business environment opens up new growth opportunities, but also brings with it new challenges and risks. Market participants must ensure that they anticipate developments in the markets at an early stage. Therefore, their success depends to a large extent on valid market information. PwC's Real Estate Monitor provides monthly information on key capital market benchmarks that highlight current trends in the real estate industry.
PwC Index for residential real estate (209) – Residential lost more than half its value within 12 months.
The PwC real estate indices for residential and commercial real estate continue to decrease after a brief recovery in July. This development further shows the uncertainty of market participants, who seem to be predominantly on the sell side. As a result, the average Price/EPRA NTA ratio of residential companies have further decreased to a new all time low of 0.40x. This means that the average market capitalization of a company only reflects 40 percent of its net asset value.
In August, the German WACC remained stable at 4.2 percent. The global WACC, on the other hand, declined by 20 basis points to 5.5 percent.
Stock price data per company within the respective peer group is collected using the S&P Capital IQ Data Idem „IQ_ClosePrice_Adj“. Capital IQ defines the Close Price as: The closing price of the day, calculated once per day after the market close. Close prices are adjusted for stock splits, cash dividends, rights offerings, and spin-offs. The underlying peer groups are revised and adjusted once per year on 31 December. New players on the German real estate market are thus identified and included, while delisted companies are excluded.
„Reliable benchmarks are key for every investor in order to balance the information asymmetry in a real estate investment process.“
The Index shows the development of respective peer group (residential and commercial) companies’ stock prices on a monthly basis. Stock price data per company within the respective peer group is collected from S&P Capital IQ and reflects the closing price of the day after adjustment for stock splits.
The WACC is the rate of return required by investors (both debt and equity) taking into account the systematic risk characteristics inherent in the business. The derived WACC is an average value of a peer group of German listed real estate companies as well as its global counterpart.
The EBITDA Multiple is a financial indicator that relates the enterprise value of a company to its EBITDA. We have derived the EBITDA Multiple based on last twelve month available EBITDA and the capitalized value for each company within the peer group (residential and commercial).
In order to gain insight into the changes in value of 21 major players in the German real estate market, we have analysed the sector-specific Real Estate KPIs FFO 1 and EPRA NTA from the financial periods FY2020, FY2021 and TFQ2022, i.e. Q3 2021 to Q2 2022 (TFQ: Trailing Four Quarters). We have put the share prices as of the balance sheet dates 31 Dec 2019, 31 Dec 2020 and 31 Aug 2022 in relation to the above-mentioned key figures from the corresponding financial periods. The resulting average ratios by segment are shown in the figures below.
The table below shows the individual FFO 1 multiples and Price/EPRA NTA ratios of our peer group by segment. The key figures relate to the financial periods FY2020, FY2021 and TFQ2022 and the share prices as of 31 December 2020, 31 December 2021 and 31 August 2022.
Reading example: Vonovia was valued by the market at 22.5x of its FFO 1 as of 31 December 2021, whereas on 31 August 2022 it was valued at 10.9x of its FFO 1.
Compared to the end of 2021, Commercial's current valuation level (as of 31 August 2022) has decreased by -27.3 percent (FFO 1 multiple) and -38.6 percent (Price/EPRA NTA ratio). In the meantime, the current valuation level of Residential has decreased by -47.0 percent (FFO 1 multiple) and -43.6 percent (Price/EPRA NTA ratio).
Disclaimer (important notice): This publication includes information obtained or derived from a variety of publicly available sources. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft does not give any representation or warranty of any kind (whether expressed or implied) as to the accuracy or completeness of this publication. This publication has been prepared solely for general informational. Nothing in this publication should be construed as individual advice. Before making any decision or taking any action, you should consult the sources or contacts listed here. The graphics may contain rounding differences.
