Vonovia SE
Rolf Buch - Vonovia
Rolf Buch, Vonovia’s CEO
Germany’s largest residential landlord Vonovia has sharply criticized the leaked plans of the Berlin Senate to impose a rental upper limit within its planned rent ceiling legislation.
Should the limit be imposed, the DAX-listed company said in a statement, it would withdraw the funds it had set aside for the modernization and upkeep of its Berlin apartments. If implemented, the measure, which relates to the year of construction of the property irrespective of both its location and other decisive characteristics, would be the equivalent of abolishing the Mietspiegel, or able of comparative rents, said Vonovia.
Two German newspapers, the Berliner Morgenpost and the Tagesspiegel, reported in their weekend editions on the draft proposal by Berlin’s city development senator Katrin Lompscher of the left party Die Linke which would provide for Berlin tenants having to pay a maximum of €7.97 per sqm in an apartment in a house built before 2014. The limit would be imposed within the framework of the previously agreed freezing of all rents for a period of five years, due to come into effect in January 2020.
“We remain convinced that the rent cap planned by the Berlin Senate is unconstitutional”, said Vonovia. Neither the rent freeze nor the actual price cap for rents would help in any way to tackle the housing shortage, and would deter necessary investment in energy efficiency and senior-friendly living. It will only worsen the housing situation, said the company.
In financial terms, if the price cap is imposed, Vonovia expects a one-off charge in 2020 on the rental income on its Berlin portfolio of between €20m and €25m, corresponding to 10% of its rental income in Berlin, and about 1% of Group income. Vonovia said it would largely or completely redirect modernization funds earmarked for Berlin into other regions. The target for Vonovia’s figures for the current full year remain unchanged, it said.
Rolf Buch, Vonovia’s CEO, had already been highly critical of the Berlin Senate’s plans to impose the five year rental freeze on rents in the city. He has pointed out that Vonovia’s tenants pay an average of €6.64 cold rent per sqm, 4% more than a year ago but nonetheless very modest rents, which enables Vonovia to invest more in refurbishment and to build new housing stock.
Vonovia currently owns nearly 400,000 housing units, almost all in Germany, but has recently been expanding in Sweden and Austria. It said it expects to have completed 2,500 new housing units in Germany by year-end, including a number of social housing units for a rent of €6.50 per sqm. It has recently initiated a scheme to install solar panels on the rooves of 200 of its housing blocks, and aims to roll this out to at least 1000 houses shortly, as part of its “1000 Roofs” programme to equip particularly its older buildings with photovoltaic systems.
Presenting the company’s first-half figures recently, CEO Buch said, “Expropriation and rent caps will not create a single new apartment. New construction is the only option. This will require everyone involved to pull together: policymakers, the housing industry and citizens. There are a large number of creative solutions but they can only be developed if we join forces instead of fighting each other. Our experience has been positive and we want to see a nationwide, pragmatic consensus for more contemporary and affordable homes.”
For the first half, Vonovia managed to boost it rental income from €890m to €1,015m vis-à-vis last year, while group FFO after interest and taxes rose from €539m to €609m. The group’s portfolio shrank slightly (own properties from 404,000 to 397,000, third-party assets under management from 83,000 to 79,000 rental units).
The full-year forecast for the group FFO is €1.17bn to €1.22bn (2018: €1.13bn) with the upswing, according to Vonovia, arising from the flow-through of the acquisitions of Buwog (Austria) and Victoria Park (Sweden), its project development business, new construction, and efficiency improvements. On rents, the average monthly net rent rose from €6.36 to €6.64/sqm, with a market-related increase of 1.2 % and investments in existing property generating a plus of 2.8%. Investments in new construction and infill increased substantially from €26.4mn to €163.5mn, while modernization expenditures grew from €565.5mn to €804.3mn.
