Annual Report 2019

Capital Markets Outlook

As Vonovia does not have any operating business in the United Kingdom, Brexit is not expected to have any direct negative consequences for the company. As a result, the potential negative implications of Brexit for Vonovia are unlikely to be material. An escalation in the trade wars could put a damper on the macroeconomic climate and the global growth outlook, possibly leading to negative repercussions on the capital markets.

The reputation of German real estate stocks as a safe haven could be enhanced as a result of Brexit if investors opt to pull capital out of real estate stocks in the UK and seek alternative investment opportunities. This sort of increased demand could actually have a positive impact on the performance of Vonovia’s shares.

In line with a large number of analysts and market participants, we expect very receptive borrowing markets and attractive financing conditions to continue in the medium term, despite a worsening but still rather attractive economic outlook and the ongoing high levels of liquidity.

With a moderate level of debt, which enables us to take out secured collateral financings, and with an investment grade rating, Vonovia’s debt instruments will remain a sought-after investment – even if investment pressure is low or liquidity levels drop. We do not expect to see any direct correlation between interest rate developments and earnings given the long maturities of our financing instruments and the smooth maturity profile. Rather, it is evident that the supply/demand situation regarding the residential real estate market and, as a result, rental development has much more of an impact on earnings. This is enhanced by the results of the Value-add Business, which is unrelated to interest rates.

As far as interest rates are concerned, we do not expect to see any significant changes within the next twelve months, nor do we predict any marked increase in risk premiums, compared with the level witnessed at the end of 2019 following the reinstatement of the European Central Bank’s asset purchase program.

Classification of debtors or securities with regard to their creditworthiness or credit quality according to credit ratings. The classification is generally performed by rating agencies.