The number is undoubtedly enormous: Europe’s largest landlord Vonovia reported a loss of around 6.8 billion euros for the past year, a negative record. However, this is not because his apartments are suddenly no longer wanted, on the contrary. It is practically completely full, only two percent of the almost 546,000 apartments are empty, said CEO Rolf Buch when presenting the figures for last year on Friday. What is putting such a strain on the company is the drastic fall in real estate prices.
For years, real estate companies like Vonovia benefited from the fact that their houses became more and more valuable on their own. For a long time, they reported ever higher profits for this reason. Since mid-2022, however, developments have been going in the opposite direction. Since the European Central Bank ended the zero interest rate phase, prices for apartment buildings have fallen by an average of around ten percent, as figures from the Association of Pfandbrief Banks show. Vonovia real estate lost 11.4 percent of its value within a year – a total of almost eleven billion euros. This leaves deep marks on the balance sheets, and not just for the people of Bochum. Recently, smaller rival LEG also reported a loss of around 1.5 billion euros, also driven by falling valuations.
“The past year was exhausting,” said Buch. “The collapse in values was the most serious we have ever experienced.” Surprisingly, the company had already published the figures the evening before, possibly so that the stock markets could digest them overnight. By midday, the share was still at the bottom of the Dax with a loss of a good six percent. For the book everything is just a snapshot. He is “firmly convinced that the days of loss of value are largely behind us,” said Buch. “The downward trend has leveled off and stability is returning.” For the future, he expects a “very long upward movement” again – simply because there is a lack of living space in Germany.
The “core rental business” continues to go well, said Buch. The operating profit in this area, adjusted for special effects, rose by 6.5 percent to a good 2.4 billion euros, also because inventories were managed more efficiently. The average rent per square meter in the group’s German apartments has only increased by a good three percent to 7.63 euros – and thus significantly less than general inflation. “Our rents are paid on time, almost without exception,” said Chief Financial Officer Philip Grosse.
In addition, the population in Germany is growing, with around 300,000 people added in 2023 alone. At the same time, however, fewer and fewer new apartments are being built. The mood in the construction industry is therefore quite gloomy. The real estate umbrella organization ZIA estimates that there will be a shortage of around 720,000 apartments in Germany next year and even 830,000 by 2027. Other analyzes are more conservative, but also assume that the number of missing apartments is well into the six-digit range.
However, Buch ruled out Vonovia doing anything about it, at least for the time being. The group completed almost 2,500 new apartments last year and the number is expected to be similar this year. However, this involves projects that have already been started and will be completed. Large new buildings will not be started until further notice. Buch primarily wants to invest in the expansion of solar power in his own homes. A total of one billion euros should flow into the inventory this year. The priority continues to be “on selling real estate at a good price,” just like last year. Vonovia earned around four billion euros from apartments, houses and entire real estate portfolios. Buch wants to earn another three billion this year.