Morgan Stanley | According to our macroeconomists, the yield on the German bond could reach 0,6% at year-end. If this happens, it would be very negative for various stocks in the real estate sector.
Over the last decade the correlation between property companies and the bond yield has been strong. So a rise of 38 pb would add a lot of volatility. This could lead to corrections of around 20% in the case of Gecina or Vonovia. Depending on the growth in rentals, leverage and the duration of their financing, the falls could be bigger or smaller.
Looking ahead at 2022, Merlin Properties (MRL) is one of our top picks. One of the main “Self Help”, Overweights, and where we can see a clear catalyst: the sale of the banks as a truly transforming event which should drive a rerating.