- Vonovia has contained losses - property values stabilised
Germany's largest residential real estate company, Vonovia, has once again posted a loss in the first half of the year, albeit significantly less than the previous year. "We are seeing higher volumes in real estate transactions again in the second quarter and the expected stabilization in our real estate values," said CEO Rolf Buch. "This gives us confidence for the full year." After completing the sales program, the company expects to switch back to growth from stabilization at the latest by 2025.
Rising Rents Boost Business
Vonovia had to write down its real estate portfolio several times last year due to the real estate crisis and incurred billions in losses. In the first six months, the company reported a net loss of 529 million euros, down from over four billion euros in the same period last year. The value of the rental portfolio stood at around 82.5 billion euros at the end of June, a slight decrease from the end of 2023.**
In its core business of rentals, Vonovia benefited from the continued high demand for affordable housing in urban areas. Rents increased by an average of 7.86 euros per square meter in the first half of the year, a 3.7% increase from the previous year. In Germany, the average monthly rent per square meter was 7.73 euros at the end of June. Vonovia rents out around 543,000 apartments in Germany, Sweden, and Austria, of which approximately 483,000 are in Germany.
More Optimism for Annual Targets
Operationally, the first half of 2024 was not as smooth for the company. The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by nearly three percent to 1.27 billion euros compared to the previous year. This was mainly due to a loss in the real estate development business and the sale of apartments. The adjusted pre-tax profit also shrank by six percent to 887 million euros, mainly due to higher interest expenses. However, the company is more optimistic about its earnings targets and rental growth for the current year.**
In an effort to expand its operations, Vonovia is considering entering the real estate market in Bochum, a city known for its vibrant economy and growing population. In fact, the CEO, Rolf Buch, has expressed interest in exploring potential investment opportunities in Bochum.
Assuming Vonovia's growth strategy in Bochum is successful, the company anticipates an additional boost to its annual earnings, alongside the continued rent increases in its existing urban markets.
