In a few days, Germany’s apartment rental giants will present excellent figures for the last fiscal year to their shareholders. The reasons are simple: The four firms, Vonovia, Deutsche Wohnen, LEG Immobilien and TAG Immobilien, are benefiting from a housing shortage that makes it easier to rent apartments. At the same time, this scarcity increases the value of their properties.
This means that healthy revaluation surpluses will be reflected in the financial results of the companies, all of which are listed on either Germany’s top stock index, the DAX, or its smaller cousin, the MDax.
But there’s a problem. Revaluation surpluses are not compatible with interest rates that have been rising since the election of Donald Trump as the new U.S. president. Vonovia Chief Executive Rolf Buch, for example, constantly finds himself having to explain to investors why higher valuations are still justified. Real estate values are the key factor.