FRANKFURT (dpa-AFX) - Real estate stocks tended to weaken on Wednesday. This was most pronounced in Aroundtown shares, which fell by more than 4 percent, although analysts attested to a good first quarter for the commercial real estate specialist.

Other German sector stocks such as Vonovia, LEG Immobilien, TAG Immobilien and Grand City Properties lost between 1 and 2.5 percent.

Investors were able to keep a low profile in the real estate sector in view of rising capital market interest rates. Ten-year German government bonds yielded 2.635 percent and were therefore not far off the interest rate high reached in November.

Rising interest rates make business difficult for real estate companies in two ways: Firstly, higher interest rates make refinancing on the capital market, where companies obtain fresh money, more expensive. In addition, sales from the portfolios tend to become more difficult.

In addition, there is often a portfolio effect: with their regular rental income, rented properties are considered a comparatively safe investment - especially when there is not much to be gained in terms of returns on the capital markets. However, if interest rates rise there, other asset classes become more attractive, such as bonds. Even within the equity asset class, shifts from the real estate sector to other sectors can often be observed in times of rising interest rates.

So far this year, real estate shares have not been in vogue. With a drop of three percent since the beginning of the year, the European real estate sector has completely missed out on the record run on the stock markets. By comparison, the Eurozone benchmark index EuroStoxx 50 has risen by a good 10 percent this year. After all, German real estate stocks have outperformed European companies in 2024./bek/ajx/jha/