Morgan Stanley | As we indicated in our last real estate strategy report, this has been the worst sector in Europe in 2Q19 (oversold and with a relative performance of 3.5sd below its 12MA). This has been mainly motivated by concerns about the proposal to freeze rental prices in the city of Berlin (and its possible spread to other cities in the country) as well as the uncertainty regarding Brexit.
However, in our last report our analysts highlighted 2 growth drivers that could change the course of the sector:
Monetary policy and bond IRR as driver for more inflows in the sector: Our macros are already discounting growth below 2% as well as inflation below the levels of the stability and growth pact. Therefore, a greater round of stimulus would be practiced guaranteed => With a large part of the government bonds offering negative yields, companies such as Klepierre or URW are offering much higher emissions, which should imply a rotation of incoming flows towards the sector.
Regulatory changes in the capital requirements of the EC: the EC reduced last month the capital requirements of Solvency 2 for the investments to / p of the insurers in RV from 39% to 22% being able to have a positive impact in the sector.