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 into 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 the Regional Planning Forecast of the German Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), urban regions are expected to continue to grow over the coming 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 in the longer term. The shortage of housing in urban areas could be exacerbated further by the effects of migration from global crisis hotspots, targeted moves resulting in labor migration and the trend toward smaller households.

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. 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.

The capital required to solve the challenges facing the housing industry cannot be raised without private sector involvement. As a result, policymakers are increasingly being called upon to create an investment climate that encourages long-term equity and borrowed capital providers to make substantial investments in the residential real estate markets. A positive investment climate also means making the necessary ecological construction and modernization measures commercially viable, making additional land available for construction, cutting back on red tape and generally promoting acceptance of private-sector real estate investors. The increasing acceptance of long-term investors for projects in the German residential construction sector is likely to open up further development opportunities for Vonovia.

In a quest to master the current social challenges, policymakers are also seeking to improve overall conditions on the housing market. Implementation of these projects is stalling at the moment – with a marked adverse effect on the housing markets (drop in new construction, growing shortage of housing, lower modernization rates in Germany). As soon as short-term solutions can be found to address this problem in terms of improved subsidy conditions and price developments, corresponding opportunities will also emerge for us. We are advocating for these very solutions via our communication channels and stakeholder dialogue (for example, through our work in associations).