Global Markets

Two German Real Estate Stocks with Solid Performance

Story Highlights

Soaring inflation and interest rates have put a dent in the German real estate markets. How safe are its stocks? Let’s find out.

Over the last few years, the German real estate market has attracted a lot of global investors. The market has been expensive, but low inflation rates and higher rental income led to a boom in the sector.

The real estate market in Europe is now getting hit by the realities of current macroeconomic pressures, with housing prices already sliding. The higher mortgage rates also hamper the buying environment for the property. According to the Deutsche Bank forecast, the prices could drop up to 25%.

Aroundtown SA (DE:AT1) and Vonovia (DE:VNA) are the two leading real estate companies in Germany that are trending as per the TipRanks database. Despite their dismal stock performance, these companies have posted solid numbers in their results, along with stable dividends. The analysts are forecasting a strong upside in their share prices.

Here, we have used the TipRanks Trending Stocks tool to pick up these stocks from the German market. This tool helps in picking the stocks that have been on the analyst’s radar in the last few days.

Let’s see what’s working for these two companies.

Aroundtown SA

Based in Luxembourg, Aroundtown SA owns residential and office space across locations in Germany, the Netherlands, London, and others.

So far this year, Aroundtown stock has lost more than half of its value. Rising inflation at record double digits and interest rate hikes have shaken the stock price of the company.

On the contrary, the company proved its operational strength in its results for the first nine months of 2022, with a strong performance against several headwinds. The total revenue increased by 28% to €1.2 billion, up from €935 million in the corresponding period in 2021. The rental income witnessed a growth of 19% to €916 million. The company disposed of a lot of mature and non-essential assets for €1.1 billion YTD, which gave it an upper hand with more liquidity. The proceeds from the disposal are sufficient for the company to pay off its debts until 2025.

What the company lacks in share price growth, it more than makes up for in dividend payments. It has an impressive dividend yield of 9.6% as compared to the industry average of 2.03%. In 2022, the company confirmed its guidance of €0.23-€0.25 dividends per share.

Aroundtown SA Share Price Forecast

According to TipRanks’ analyst consensus, Aroundtown stock has a Moderate Buy rating, with six Buy, six Hold, and two Sell recommendations.

The AT1 average target price is €3.21, which represents a 37% change from the current price level. The price has a low and high forecast of €2 and €5.2, respectively.

Vonovia SE

Vonovia SE is more focused on residential real estate. The company owns more than 5,00,000 apartments in Germany, Sweden, and Austria.

The company’s stock has fallen by 54% YTD. However, the financial numbers do paint a promising picture of future growth. Vonovia posted a 31.4% increase in its total revenue of €4.6 billion for the first nine months of 2022. The total housing portfolio was down by 3.4% at 5,49,010 units during this period.

The company’s merger with Deutsche Wohnen in 2021 was a success, and the expected synergy is €90 million in 2023 and €105 million per year from 2024. This will boost the liquidity position of the company, which is much needed in the current trading environment.

Looking ahead, the company remains confident in its stable outlook and forecasts revenue between €6.8 billion and €7.4 billion in 2023.

The dividend yield for Vonovia is at 7.75%, and it is known for rewarding its shareholders in a generous way. In 2021, the board approved a dividend of €1.66 per share.

Is Vonovia a Good Stock?

According to TipRanks’ analyst consensus, Vonovia stock has a Strong Buy rating, with 11 Buy recommendations.

The VNA target price is €38.67, which shows a huge upside potential of 80% on the current level.

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Both of these companies are operating in a tough environment but have still managed to keep shareholders happy with higher earnings and dividends. These companies have well-diversified portfolios among different assets and locations and a strong grip on their tenant base, which will help them stay afloat during stormy weather. Considering the analyst’s view, the stock prices should also recover over the long term.


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