Vonovia Cuts Rental Growth Forecast to 3.8%, Trims 2028 Targets as Financing Costs Rise
Key Facts
On October 28, Vonovia cut its 2026 organic rental growth forecast to around 3.8% from around 4%, and expected operating free cash flow to be moderately lower than in 2025. The company kept its 2026 adjusted EBITDA guidance within a range of €2.95 billion to €3.05 billion, but placed its expectation in the lower half of the range. By contrast, it expects rental income and adjusted earnings for shareholders to come in in the upper half of their respective ranges. CEO Luka Mucic said that "core operating business is stable," but added that higher financing costs are weighing on financial results and transaction volumes in sales-related activities. That puts slower growth and financing pressure at the center of the company's update, while operating earnings guidance remains within its previous range.
Results for the first nine months showed a divergence among performance indicators. Adjusted EBITDA rose to €2.19 billion from €2.118 billion in the corresponding period. But adjusted profit before tax fell to €1.41 billion from €1.460 billion, while adjusted earnings for shareholders declined to €1.12 billion from €1.201 billion. Vonovia attributed weaker rental growth to lower investment, particularly in development projects for its own portfolio, and to local rent increases in Germany that were slightly weaker than expected. It said rental and value-added services performance remained positive, while higher financing costs hurt the sales and development segments.
The company linked constraints on investment and transactions to the higher cost of capital, noting that the yield on its 8-year unsecured bond reissue had risen by around 140 basis points since the start of the Iran war. It said the higher yield was weighing on investment decisions and transaction activity. In this context, it announced a temporary suspension of new investment under its "Manage to Green" program, while continuing targeted investments, including decarbonization. New-build activities within its portfolio will also undergo a strategic review. These steps are consistent with the company's reduction of planned investment for 2028 from around €2 billion to around €1.7 billion.
Vonovia also cut its target for compound annual growth in adjusted profit before tax through 2028 to around 4.5% from around 5%. The adjustment reflects a broader review of its growth and investment trajectory amid higher interest rates, according to Reuters via MarketScreener. In its first guidance for 2027, the company expected adjusted EBITDA to be slightly above the 2026 level and adjusted profit before tax to remain roughly at the previous year's level. It estimated 2027 investment at around €1.5 billion, with organic rental growth of around 4%. The full third-quarter interim statement is due to be published on November 4, after these preliminary guidance figures were announced.
The company faces a potential political and regulatory risk in Berlin from a proposal to transfer housing owned by large companies into public ownership in exchange for compensation. Vonovia owns around 130,000 homes in the capital, making it one of the companies most affected by the plan. An exploratory paper submitted by the three parties on October 17 set a threshold of 10,000 apartments for potential expropriation, with a total compensation cap of €16 billion. The proposal aims for the legislation to be passed in mid-2028, but it is not an enacted law. The company said the plan in its current form is unconstitutional, while its implementation depends on a subsequent political and judicial process.
Vonovia estimated that the value of its real estate portfolio would be roughly stable during 2026 compared with the end of 2025, following four consecutive half-year periods of valuation gains. In trading, EL7 data showed that the company's U.S.-listed share closed at $8.87 on October 29. Vonovia shares had fallen to €16.31 in the October 19 session before partially recovering to €16.55, according to data cited by Investing.com. The report linked that pressure to the Berlin proposal and market risks, while pointing to the legal and constitutional hurdles facing the plan. Financing pressure is already evident in the company's investment and forecast revisions, while the Berlin proposal remains a future political process.