FRANKFURT (dpa-AFX) - Investors continued to give the real estate sector a wide berth on Wednesday ahead of the U.S. interest rate decision. The Stoxx Europe 600 Real Estate sector index continued its previous day's weakness with a discount of 2.3 percent and marked a low since October 2022. The pressure was particularly strong at Vonovia: After a negative study by Morgan Stanley, the securities became the Dax's worst performer with a discount of 4.1 percent. They marked a low since 2014.

Morgan Stanley analyst Bart Gysens said Wednesday he was generally cautious about continental European stocks because of achievable yields, rental income at risk and often too much debt. This increases the risk of capital increases becoming necessary, he said. Shares in Aroundtown or Grand City Properties slid by up to three percent in the MDax or SDax.

Gysens downgraded Vonovia from "Equal-weight" to "Underweight" on Wednesday and cut the price target significantly from 30 to 19 euros. While he approves of the fact that some companies recently announced a dividend waiver to strengthen the balance sheet, he sees a point of criticism here with Vonovia. The Bochum-based company had merely cut its dividend. Gysens therefore fears that further measures will be necessary to repair the balance sheet.

On Wednesday, investors are now eagerly waiting to see what course the Fed will take. Some are hoping that the recent turmoil in the banking sector will tempt the monetary guardians to adopt a more moderate monetary policy - perhaps even with a standstill. On the other hand, however, the Fed is under pressure to contain high inflation with further rate hikes. Economists therefore largely expect a further tightening of 0.25 percentage points. In the meantime, a more substantial hike, as Fed Chairman Jerome Powell had held out the prospect of before the unrest on the markets, is considered unlikely.

Rising interest rates are a burden on the real estate sector, as they worsen financing conditions for companies and, moreover, in the real estate market in general. In addition, real estate companies have to reduce the valuations of their portfolios, which were inflated during the zero interest rate phase.

The sector has therefore been on a downward slide for a long time. At the end of 2021, the Stoxx Europe 600 Real Estate still stood at 200 points, and at the previous year's low it had halved. A temporary recovery until the beginning of February 2023 was recently wiped out. This year, the sector is one of the biggest losers, while the Dax 2023 is currently up nine percent./tih/ag/mis