Vonovia expects the end of the price decline - hope for stabilization

Vonovia expects the end of the price decline - hope for stabilization

Germany's largest real estate group, Vonovia, reported a profit increase in the first quarter of 2024, suggesting that the decline in real estate prices may soon be coming to an end. CEO Rolf Buch announced that a return to growth was in prospect as the value of the real estate portfolio was stable. In the period from January to March, Vonovia made a profit of 335.5 million euros, compared to a loss of around two billion euros in the previous year.

Adjusted profit before taxes (EBT) in operating business fell by 7.3 percent to 416.5 million euros from January to March. Rents increased by 3.8 percent, while the company expects adjusted Ebitda of between 2.55 and 2.65 billion euros for the financial year. Vonovia was optimistic about organic rental growth and increased expectations to 3.8 to 4.1 percent.

Expert estimates from the Association of German Pfandbrief Banks (VdP) indicate that the ECB's expected interest rate turnaround could lead to a stabilization of residential property prices next year. The VdP President emphasized that the real estate industry continues to face challenges because the correction phase has not yet been completed and the bottom has not been reached.

In order to reduce debt, Vonovia recently decided to sell around 4,500 apartments in Berlin and a piece of land to municipal housing companies for a total of around 700 million euros. In total, the company is planning sales this year worth around three billion euros. Vonovia aims to keep the debt ratio between 40 and 45 percent and expects an annual organic increase in value of 3 billion euros from 2025 thanks to the continued high demand for apartments. Investments in modernization are expected to increase.