Vonovia SE

Overview Key strengths Key risks Very large portfolio of income-producing residential property assets, worth about €82.5 billion as of June 30, 2024. High reliance on Germany and its economy, despite some exposure to Austria and Sweden. Good asset localization in regions that enjoy supportive economic and sociodemographic trends, mostly in Germany (89% of asset value), Sweden (8%), and Austria (3%). Rising affordability risk in the German residential market due to rising inflation and rents, which could lead to political pressure to introduce further tenant-friendly regulation. Strong track record of like-for-like rental income growth, supported by a highly diversified asset and tenant base, high occupancy rates, and long tenant stays. A relatively high, albeit declining, debt-to-EBITDA ratio of 15x-17x (excluding revenue

...In the first half of 2024, Vonovia SE posted resilient rental growth in line with expectations. The company reported a robust 3.8% organic rent growth as of June 30, 2024 (compared with 3.5% in the first quarter and 3.3% in 2023), supported by growing indexation, elevated difference between in-place and market rents, and despite a low tenant fluctuation (8.1%). We expect the lagging indexation and housing shortage in Germany to support rental growth for at least two more years. Devaluations are losing steam, but our assumptions remain conservatively unchanged. The company reported a 1.4% asset value like-for-like decline as of June 30, 2024, lower than our 4.0% assumptions for 2024. We understand valuations are likely to stabilize in the second half of the year, and price of condominiums have started increasing in Germany according to some recent market research. This is thanks to stable interest rates and two years of unprecedented price correction. Vonovia reported a 16.4% value decline...

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