Why Analysts See a 50%-Plus Upside in Vonovia Even as Financing Costs Rise

Vonovia’s shares are stuck near €22.30, but a pair of major investment banks see the German landlord climbing well past €34. That disconnect between market sentiment and analyst conviction is rooted in two contrasting stories: a worsening interest-rate burden versus aggressive debt reduction and resilient operating businesses.

JPMorgan reiterated its “Overweight” rating on Vonovia last week with a price target of €34.50, following a London strategy meeting that highlighted the company’s progress in shrinking its liabilities. Analyst Neil Green argued that the tightening of the balance sheet through targeted property sales will eventually allow management to regain the flexibility it lost when borrowing costs shot higher. Berenberg went even further: it kept a “Buy” recommendation and a target of €38, implying a 67% upside from the stock’s recent level of €22.68. Goldman Sachs also chimed in with a positive sector view, suggesting the bottom for European real estate may already be in.

The urgency of the deleveraging push is underlined by the first-quarter numbers. Vonovia’s adjusted pretax profit fell 4.1% year-on-year to €462.2 million, entirely because of higher finance expenses. The group’s long-term funding costs rose by half a percentage point to 4.5%, a headwind that chief financial officer Philip Grosse is watching closely. Despite the drag, management insists the portfolio value will remain stable to slightly higher.

Should investors sell immediately? Or is it worth buying Vonovia?

Away from the interest-rate squeeze, the operating picture is more upbeat. Vonovia’s services division — which handles everything from maintenance to energy management for its residential tenants — posted a 30% jump in adjusted operating profit at the start of the year. The core rental business also chipped in with a 6.3% rise in earnings, supported by an occupancy rate that stayed at a consistently high level across the portfolio.

The company is also refreshing its leadership. Katja Wünschel takes over the project-development unit on 1 June, replacing Daniel Riedl. Her brief is to revive new construction by leaning on falling building costs and serial modernisation techniques, with a medium-term ambition to resume building up to 3,500 apartments annually. That target is far below Vonovia’s peak years, but it signals that management sees enough daylight to start investing again.

All this comes against a backdrop of mixed sector signals. TAG Immobilien, one of Vonovia’s domestic peers, grew its first-quarter operating profit by 10% to €49.3 million. Grand City Properties changed its dividend policy, pledging to pay out half of its FFO 1. But a fresh tax forecast from May 2026 warns of significantly lower municipal revenue in coming years, which could crimp public investment in housing and weigh on the entire industry.

Vonovia shareholders have a key date on 21 May, when the annual general meeting will vote on the proposed dividend of €1.25 per share. At the current share price, that yield is generous — but the market is clearly pricing in more risk than the analysts see. For now, the bank strategists are betting that the balance-sheet overhaul will eventually close the gap.

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Vonovia Stock: New Analysis - 12 May

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