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Economic Environment and Market-Related Opportunities

The housing industry is being influenced to a considerable degree by a range of social and technological megatrends. According to analyses released by the German Federal Statistical Office, domestic migration from rural areas to the country’s large metropolitan areas will continue unchanged. The resulting shortage of housing in urban areas could be exacerbated even further by the effects of migration from global crisis hotspots and the trend toward smaller households. In response to the shortage of (skilled) workers and the dwindling population, the German government has set itself the goal of promoting immigration from non-EU countries specifically. The German Federal Employment Agency (Bundesagentur für Arbeit) expects Germany to require around 400,000 immigrants a year to close the gaps on the labor market resulting from demographic changes. According to the Cologne Institute for Economic Research, this translates into a potential shortfall of as much as 308,000 apartments a year in the medium term. This development trend could benefit our existing real estate portfolio, which focuses primarily on small and medium-sized apartments in urban areas. Vonovia is in a position to counter the increasing shortage of affordable housing through its development and new construction business. The German government coalition agreement has set a target involving the construction of 400,000 new apartments per year. This will not be possible without deregulation measures and the provision of additional land for construction, which could, in turn, create opportunities for Vonovia.

One aspect that enjoys a particularly prominent position in the coalition agreement is climate protection. Within this context, the decision taken very early on to focus on energy-efficiency refurbishments could prove to be advantageous. After all, almost one-third of CO2 emissions in Germany can currently be attributed to residential property. Vonovia sees itself as a driver of innovation in the quest to solve this problem. Increased environmental awareness could result in the Vonovia brand taking on increasingly positive connotations in the future thanks to its effective innovations and in greater demand for Vonovia’s energy-efficient apartments.

The Ukraine war has flagged up just how dependent Europe is on energy imports. The current energy shortages caused by the war in Ukraine will increase investment and the use of renewable energies. Vonovia’s “1,000 roofs” program, which fits PV systems to the roofs of Vonovia buildings, is expected to benefit from further tailwind as a result. The investment program, for which sufficient funds from internal financing have been set aside, will open up further potential opportunities through the tenant electricity initiative.

The merger with Deutsche Wohnen offers further opportunities for implementing the approaches described thanks to what is now a larger existing and development portfolio.