...September 5, 2023 Vonovia's rent growth should remain solid, partly offsetting poor performance in its other segments. The company reported 3.5% like-for-like growth in rental income for first-half 2023 (3.3% in 2022), at the high end of our conservative 2.5%-3.5% assumption for 2023-2024, thanks to strong uplifts in rent renewals, slowly growing indexation, stable and low vacancy rates (2.2%), and a record high collection rate (99.9%) despite inflation biting German households' purchasing power. Still, the company's ability to capture rental growth is limited by lower investments in modernization (which would otherwise allow it to increase rents beyond indexation levels) and very low tenant churn (less than 8% as of June 30, 2023). As we expected, Vonovia's other segments--value-add, development, and recurring sales--were materially depressed in the first half of 2023 given the fall in market transactions amid increased interest rates. We do not expect a strong recovery before 2024, though...
