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Economic Environment and Market-related Opportunities

The housing industry is being influenced to a considerable degree by social trends. One key trend involves the influx of people from rural regions to urban areas. The infrastructure in urban areas is well developed, with extensive healthcare services available. People do not have to travel far to work and can enjoy varied leisure activities. According to analyses released by the German Federal Statistical Office, domestic migration to the country’s large metropolitan areas will continue unchanged over the next few years. The current slowdown in construction activity is likely to result in an even greater imbalance between the supply of and demand for housing in conurbations. 350,000 to 400,000 new residential units will have to be built every year over the next twenty years. The shortage of housing in urban areas could be exacerbated further by the effects of migration from global crisis hotspots and the trend toward smaller households.

In response to the shortage of (skilled) workers, 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 would translate into a potential shortfall of as much as 308,000 apartments a year in the medium term.

Our company can reap considerable benefits from these trends: With our existing real estate portfolio, we focus primarily on small and medium-sized apartments in urban areas. This means that we offer the right homes in the right places. Vonovia is also in a position to counter the increasing shortage of affordable housing through our development and new construction business (to sell and to hold). This is subject to the proviso that the overall economic and political conditions and the investment environment improve. This will not be possible without deregulation measures and the provision of additional land for construction, which could, in turn, create opportunities for Vonovia.