Deutsche Wohnen:Quarterly Results/2024 Q2

Earnings summary

Here is a summary of the results^[1];

Deutsche Wohnen said sale of six properties in the nursing segment have already been completed and that the sale is still expected to be completed at the end of 2024.
It said that on July 2024, it entered into a notarized sales contract for the sale of 1,089 residential units and six commercial units. The purchase price of the properties is slightly above the book value (around 160 million).
Deutsche Wohnen pointed out that H1 was characterized by high demand for rental properties and positive rent development.

The firm said pricing is starting to stabilized. "In the residential property market, the price expectations of sellers and buyers are slowly converging, and in some areas, rising prices are being observed again. The real estate investment market initially remained subdued but recently showed increasing transaction volumes in the residential segment."
"The empirica price index for condominiums (all construction years) was 3.6% lower in the second quarter of 2024 compared to the same period last year, but compared to the previous quarter, the decline was only 0.4%. Other market observers see prices for existing homes (Immowelt) or condominiums (Europace) slightly above last year's levels on average by mid-year. In the new construction segment, the empirica price index for condominiums was 1.9% higher in the second quarter of 2024 compared to the same period last year. According to Helaba specialists, price stabilization in 2024 is likely, while Immowelt experts expect prices to rise in the latter part of the year," the report highlighted.

Transaction volume were subdued in the first half of 2024. According to CBRE, volume totaled 2.8 billion euros (-10% y/y) mainly due to a decrease in realized capital values and traded qualities.
There was a noticeable increase in transaction activity in Q2 compared to Q1 with strongest net buyers being public authorities and asset /fund managers.
Transaction was mostly concentrated in Berlin, according to CBRE.
Prime yields in the Top-7 cities were stable at 3.4% on average.
CBRE forecasts that the transaction volume will reach at least 5 billion euros in 2024 driven by disposals by funds and publicly traded residential companies in need of refinancing.

Deutsche Wohnen pointed to data that indicates further tightening in demand surplus. They pointed to Destatis data which indicates 294,400 (-0.3% y/y) apartments were completed in Germany in 2023. DB Research estimates indicate that this number could drop further to 260,000 in 2024.
German population and especially that of Berlin is expected to grow further.
Official statistics indicate that 16,000 apartments were completed in Berlin in 2023, less than the 20,000 apartments needed annually (according to Investitionsbank Berlin (IBB))