FRANKFURT (dpa-AFX) - Real estate stocks took some toll Wednesday on the recovery rally of recent days. The development was underpinned by a skeptical industry study by investment house Stifel, which predicts further trouble for investors.

Around midday, the sector index in the market-wide Stoxx Europe 600 was still down almost 0.7 percent. Thanks to the recent recovery, which at times saw it rebound more than eight percent from its low since October 2022, it did curb its annual loss to 7.8 percent. However, it is still the second biggest loser in the European sector table.

The sector barometer bounced downward off the 50-day line it had reached the previous day. This is considered a short- to medium-term trend indicator. In addition, the 21-day line as a short-term indicator, which was broken the previous day, is now again in danger.

In the Dax, shares in Vonovia were among the biggest losers on Wednesday, falling by 1.9 percent. The same applied in the MDax for TAG Immobilien with minus 3.1 percent, while LEG Immobilien declined by 1.2 percent. In the SDax, Aroundtown, Grand City Properties and Patrizia Immobilien were far behind, with price reductions of 1.8 to 2.1 percent.

According to Stifel analysts, the German real estate sector is threatened by "a long hangover instead of a civilized after-show party" after the bull market, fueled by increasingly favorable financing conditions, came to an abrupt end. It was increasingly dawning on investors, he said, that interest rates were almost certainly not expected to remain temporarily high.

The loan-to-value ratio could reach dimensions that would make refinancing even more difficult. There would then be a risk that larger capital increases would be necessary. In any case, however, the development could result in a decade of limited profit growth.

The experts downgraded Vonovia, LEG and TAG and now advise selling. The three shares had outperformed the sector from 2018 to mid-2022, but had underperformed since then. Compared to the interim highs in mid-2021, price losses of around two-thirds are now on the books.

Recent statements by central bankers also speak for further high interest rates. Bundesbank President Joachim Nagel warned on Wednesday against overestimating the recent decline in the inflation rate. It was "too early to sound the all-clear," Nagel said, according to the text of his speech at the opening of a Bundesbank symposium in Frankfurt. "Because inflation has gained breadth overall." Earlier in the week, Nagel had already spoken of the need for further interest rate hikes by the European Central Bank in the fight against high inflation./gl/men