Phoenix Spree Deutschland Ltd on Tuesday said its portfolio value fell last year, as condominium sales were hurt by higher costs of living and borrowing costs, and it expects to report a negative total return.

The investor in Berlin residential real estate said its portfolio of investment properties was valued at €775.9 million on December 31, down 3.2% from €801.5 million at the end of 2021. On a like-for-like basis the value fell by 3.1% in 2022 and by 5.2% in the second half of the year alone.

Phoenix Spree estimated that the reported EPRA net tangible assets per share at the end of 2022 was within a range of €5.09 to €5.14, representing a total return of negative 7.3% to negative 8.2%. EPRA refers to European Real Estate Association.

Looking ahead, the company highlighted an improved economic picture in Germany in recent weeks, reflecting a significant reduction in energy prices and the Berlin government’s fiscal support package, which together with falling inflation means the German economy is now expected to avoid recession in 2023.

Nevertheless, Phoenix Spree warned the outlook for property values in 2023 is likely to remain challenging and further declines in property values cannot be discounted.

However, it did report an encouraging start to 2023 and pointed out that it remains conservatively financed with no loans maturing until September 2026.

‘The board considers the current level of gearing and cash balances to be appropriate at this stage in the real estate cycle and will not seek to undertake further acquisitions or increase debt levels until such time as the market outlook becomes more stable’ Phoenix Spree said.

Shares were down 1.6% in London on Tuesday afternoon at 248.00 pence.

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