The largest German real estate group has surprisingly lowered its forecast. The stock market reacts in shock. The current rental market figures offer these lessons.
Vonovia expects organic rental growth for 2026 to be only 3.8 instead of around 4 percent and for 2028 with around 4.5 instead of around 5 percent.
The company cites increased capital costs in project development as the reason, which is delaying investments.
The DAX group wants to review its business model and focus more on affordable housing. An update will follow with the annual figures.
Investments in new construction and renovation will fall from the planned around 2 billion to 1.7 billion euros in 2028 in order to achieve higher risk-adjusted returns and protect liquidity.
Frankfurt. Higher interest rates, a weak market and a socialization debate in Berlin: Things are not going well for Vonovia CEO Luka Mucic. The DAX group actually didn't want to present its figures for the first nine months until next week. But given the difficult situation, the people of Bochum are now surprisingly rushing forward and are much more cautious about their outlook.
The stock market reacted with shock. The Vonovia share price fell significantly on Thursday. It is therefore worth taking a closer look at the figures for investors and tenants. Because the business figures show some unusual developments.
What do the figures from Germany's largest landlord, which maintains around 535,000 apartments in Europe, mean for tenants and investors? The current figures provide seven insights.
1. Rents: They are rising more slowly than expected
Vonovia is lowering its expectations of an increase in rents. The landlord now expects only around 3.8 percent organic rental growth for 2026 instead of the previously targeted around 4 percent. For 2028 it is now around 4.5 instead of around 5 percent.
The reason is remarkable: Vonovia cites increased capital costs in project development. They delay the creation of new living space for your own existing property. Rents are rising more slowly, but the reason is not due to regulation, but rather because Vonovia is slowing down its investments.
2. More focus on affordable housing
Vonovia announces that it will subject the project development to a strategic review. The people of Bochum want to align the business model more strictly with affordable housing. This is a declaration of intent, not a result - an update should come with the annual figures.
Mucic had already called for a significant change of course in Germany in the summer: apartments should be planned more simply and built more cheaply.
3. Less new construction for your own existing stock
The new construction business for its own portfolio is being reduced, as the Dax-listed company in Bochum announced. Investments will fall from around 1.4 billion euros (old planning for 2026) to around 1.3 billion euros. For 2028 they will fall from the planned around 2 billion to around 1.7 billion euros. This is a withdrawal from the new construction and renovation business - in a market in which, according to associations, there is a shortage of 1.35 to 1.4 million apartments.
The division is now being strategically reviewed in order to achieve higher risk-adjusted returns and to align the business model more closely with affordable housing, the company said. Overall, Vonovia is also relying on an action plan to protect liquidity. According to Vonovia, debt relief remains the “top priority”.
4. Transaction market continues to weaken
The transaction market is still not gaining momentum. There are only limited signs of recovery, the statement said. Financing conditions have deteriorated significantly since the beginning of the conflict in the Middle East, especially since the most recent ECB interest rate decision in September. Since the escalation began in the Middle East, the yield on eight-year Vonovia bonds has risen by around 140 basis points.
The head of Germany's second-largest landlord, Düsseldorf-based LEG Immobilien, also recently spoke of a tough market. “The market is running out of steam,” LEG boss Lars von Lackum told Handelsblatt a few weeks ago. For the year as a whole, he even expects a decline compared to the previous year.
5. Stock hits new three-year low
Is the Vonovia share, which has fallen sharply, perhaps a buy again? This is what traders have recently been asking themselves with timid hope. The price of the DAX group has fallen by more than 30 percent since the beginning of the year. But the stock market reacted again with sales in view of the recent bad news from Bochum. The shares in the Dax fell by up to 7.3 percent compared to the Xetra closing price the previous day. The papers have thus marked a new low since spring 2023.
The real estate group's figures are "not a disaster, but they don't help either," commented one dealer. Kai Klose, analyst at Berenberg Bank, still classified the share as a buy - but he lowered the price target to 23 euros. “The sentiment following the report is clearly negative,” says Karsten Oblinger, analyst at DZ Bank. However, he also rates the stock as a buy.
6. Operating business stable – but hardly growing
“Vonovia’s core operational business remains stable,” emphasized Mucic. “However, higher financing costs are weighing on both the financial result and transaction volumes in our sales-related business areas.” The company, on the other hand, relies on stricter return requirements, checking project development and securing liquidity.
For the current year, Vonovia now expects an operating result (adj. Ebitda) in the lower half of the previous range of 2.95 to 3.05 billion euros. Adjusted earnings before taxes (adj. EBT) are expected to be at the lower end of the range of 1.9 to 2.0 billion euros. For 2028, Vonovia is also becoming a little more cautious and is currently assuming a value at the lower end of the forecast range of 3.2 to 3.5 billion euros.
7. Early analysts fear for dividends
As feared, the real estate group has lowered its targets for a number of financial indicators due to higher financing costs and weaker transaction business, wrote Neil Green of JP Morgan. The question is whether the dividend will be cut or eliminated to reduce debt. The increase in operating income for shareholders was primarily neutralized by higher financing costs, explained Vonovia.
But when it comes to interest rates, there is currently no all-clear in sight. Florian Paffinger, member of the expert council of the real estate financing agent Dr. Klein expects continued pressure on interest rates in the coming weeks. He expects building interest rates to remain at the current, higher level in the coming weeks: “I think 4.0 to 4.5 percent is realistic by the end of the year.”
