The residential real estate sector, which has risen sharply recently and is enjoying a flow of mutual fund funds, has been hit hard and has shown a negative return of 12% in the last week and a 13% drop since the beginning of the month
In general, the real estate sector showed weaker results than most sectors in the whole of February and also in a weekly look, more relevant to the events of Ukraine, the real estate sector recorded sharp declines. However, when examining stocks in depth, it can be seen that the market has made a separation between the types of sectors.
The residential real estate sector, which has risen sharply in recent times and has enjoyed a flow of mutual fund funds, has been hit hard and has shown a negative return of 12% in the last week and a 13% decline since the beginning of the month. Of the large companies, Israel Canada and Shikun VeBinui stood out, which recorded a decrease of only about 5%, similar to the market trend. In the negative, Hajj Europe stood out with exposure to Eastern Europe and Linstein Engineering.
We estimate that opportunities have been created in the sector when the impact of the past week does not directly affect companies.
The income-producing real estate sector in Israel fell much less than the housing companies this week, a decline of only 3% and a decline of 6% from the beginning of the month. The latter are Arena Group, Isras, which reported large revaluations ahead of the reports, and Gev Yam shares, in which trading is low and in the background there is a purchase offer from the parent company for some of the shares.
The income-producing real estate sector abroad fell by about 8% this week when here are a number of companies that were directly affected by the exposure to Russia or Eastern Europe. Atrium, a subsidiary of Gazit Globe, for example, has exposure to a number of properties in Russia amounting to about 250m euros (10% of the properties) and Effie Properties also has exposure to Eastern European countries (Czech Republic, Poland, Romania and Serbia). Both companies fell about 9% this week.
Bottom line
The last month has seen sharp declines in the real estate sector, especially in the residential sector and companies with higher exposure to Eastern Europe. Nevertheless, economically, the impact of the war in Ukraine on real estate stocks in Israel is low. Outflows from mutual funds and rising interest rates are factors that are expected to have a more substantial impact on the sector, certainly in the long run.