Fair Values

Major market developments and valuation parameters that have an impact on the fair values of Vonovia are assessed on an ongoing basis. The positive development of known parameters, which can be observed in particular until the beginning of March 2020, and the positive market environment that continued until the beginning of March 2020 generally indicate an increase in value. This reliable development is continuously examined for the purposes of presenting it in the interim consolidated financial statements on June 30. There have been no demonstrable effects connected to the coronavirus pandemic on the fair value of investment properties as of March 31, 2020. As in the previous year, Vonovia will be performing a new valuation for major parts of the portfolio at the end of the first half of the year.

In addition, buildings under construction (new construction/development to hold) were completed during the reporting period. A fair value measurement is performed for the first time when the properties are completed. This resulted in a valuation effect of € 4.1 million for the period from January 1 to March 31, 2020 (3M 2019: € 5.3 million).

At the end of January 2020, the Berlin House of Representatives passed the Act on Rent Controls in the Housing Sector in Berlin (referred to in short as “rent freeze”). This came into force in February 2020. It remains disputed whether the law is constitutional. There is a risk that, depending on the constitutionality of the rent freeze in particular, future rental income or rental development could be reduced, with a knock-on effect on fair values. Likewise, it cannot be ruled out that declining vacancy rates and fluctuation as well as lower return requirements of investors (yield compression) will subsequently have a compensatory effect on fair values. There is no evidence of any impact on fair values at present.

At the moment, there are no signs suggesting that the current coronavirus pandemic will have an impact on fair values, or on future rent and price developments. Residential real estate could become more significant as a relatively secure form of investment. The demand for residential real estate could, however, also change depending on the duration and extent of a possible recession.

The recognition and valuation of investment properties are explained in detail in the consolidated financial statements for 2019. The potential implications can be estimated via the sensitivities shown in the notes to the consolidated financial statements for 2019.