Response to the Inflation Rate: Vonovia believes rent increases are necessary

Status: 01/06/2022 14:52

Millions of German tenants have to adjust to higher housing costs. The Vonovia housing group has made it clear that it considers significant rent increases to be inevitable. The tenants’ association reacted with harsh criticism.

Hard times are ahead for many tenants in Germany. As Germany’s largest real estate company, the DAX Vonovia group, considers significant rent increases to be inevitable in the face of high inflation and has now agreed that tenants should take the appropriate measures.

“If inflation remains steadily at four percent, rents will have to increase accordingly in the future,” said Handelsblatt, Vonovia CEO Rolf Buch. Otherwise, many owners would get into serious trouble. “We cannot pretend that inflation will bypass rents. It won’t work, ”Buch continued.

Strong criticism of the tenants’ association

The German Tenants’ Association (DMB) sharply criticized Vonovia’s statements regarding the upcoming rent increases. “The fact that tenants must be held accountable for the collapse of Vonovia’s share price and higher interest rates in the capital market shows that the business models of listed housing groups are anti-social and speculative,” explained DMB CEO Lukas Siebenkotten.

He recalled that in the year of the 2021 pandemic, Vonovia earned around EUR 1.7 billion and paid the company’s highest dividend in the history of EUR 1.66 per share. According to DMB, rents in the group’s apartments increased in the same year by an average of 3.8 percent, and in Berlin by 8 percent. Vonovia has also acquired the second-largest listed development group Deutsche Wohnen for around 19 billion euros.

“You can see at the latest that the flowery announcements of the top management of Vonovia during the takeover of Deutsche Wohnen that current rents should not increase by more than one percent per year are nothing more than a waste,” criticized Siebenkotten. Politicians and the cartel office were “led through the nose ring.” – After all, tenants pay for everything, this is the business model of Vonovia and Co. – says the president of the Association of Tenants.

A spokeswoman for the group presented the statements with perspective

Apparently against the background of this criticism, a spokeswoman for Vonovia said that the statements of president Buch concerned economic development, and not a specific announcement. “We are talking about economic relations in the housing market,” she said. There would be a sharp rise in construction prices, especially in new buildings. New lease contracts are included in the rent index.

“We are in a highly regulated market and that still applies,” said a spokeswoman for Vonovia. The firm keeps its promise to its own housing stock in Berlin that rents will not rise by an average of one percent for the next three years, and then no more than inflation.

Inflation is almost eight percent

According to preliminary estimates by the Federal Statistical Office, inflation in Germany rose to 7.9 percent in May. Inflation rates at this level have never existed in reunified Germany. In the old federal states, inflation recently reached similarly high levels in the winter of 1973/74. During this time, oil prices rose sharply in the wake of the first oil crisis.

The average rent in Vonovia increased to EUR 7.40 per square meter in the first three months of this year, or 3.1%. more than a year earlier. The real estate group has around 565,000 apartments, most of them in Germany.

Different assessments of a possible price bubble

The Bundesbank recently warned of housing price bubbles in large cities. According to the office, residential real estate is overvalued by up to 40 percent. On the other hand, Vonovia’s boss Buch is unable to identify any overheating trends in the city’s real estate markets due to the “normal rental districts” that Vonovia has in its portfolio.

“The apartments in the cities we offer are torn from our hands. You don’t see any soap bubbles there, ”said Buch. According to the president, the demand gap will become visible only when people no longer want to live in cities. But it doesn’t look like that.

Vonovia announces higher rents due to inflation

Jan Plate, HR, 1/6/2022 9:26 a.m.

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