13 Net Income from Fair Value Adjustment of Investment Properties
Investment properties in the German and Austrian portfolios are measured by the in-house valuation department according to the fair value model. Any gains or losses from a change in fair value are recognized in the income statement. External appraisers are responsible for the valuation of the portfolios in Sweden. The measurement of the investment properties led to a valuation gain during the 2020 fiscal year of € 3,719.8 million (2019: € 4,131.5 million; see explanatory information in chapter [D28] “Investment Properties”). This includes € -1.8 million (2019: € 2.7 million) for the measurement of right-of-use assets (IFRS 16).
The figure also includes the valuation result from buildings under construction (new construction/development to hold) that were completed during the reporting period and were moved to the Rental portfolio. A fair value measurement is performed for the first time when the properties are completed. This resulted in a valuation effect of € 62.0 million in the 2020 fiscal year (2019: € 58.9 million).
The valuation result for 2020 is mainly due, in addition to the investment activity and strong development of Vonovia’s operating business, to the dynamic market conditions for residential properties at the moment. These are reflected both in rental price developments and, in particular, also in an increase in real estate purchase prices triggered, among other things, by yield compression on the demand side. We are currently observing stable demand for rental apartments and no negative impact on fair values as a result of the coronavirus pandemic as of December 31, 2020.