Vonovia's Berlin Building Push Meets Courtroom Setbacks and a Halved Cash Engine

Vonovia pushes back on expropriation calls as legal challenges mount and first-half operating free cash flow falls 45.4% to EUR 607.5 million.

Vonovia is trying to recast itself as part of Berlin's housing solution rather than its problem, but the DAX landlord's messaging offensive is running straight into a pair of legal challenges and a sharply weaker cash picture.

Chief executive Luka Mucic made the case that private investment is indispensable to easing the capital's housing shortage. Roughly 1,000 new residential units are currently under construction across Berlin, on top of 6,000 that the group has already completed in recent years. The company also pointed to its rent levels as evidence of restraint: at the end of June, the average in-place monthly rent across its Berlin portfolio stood at EUR 8.26 per square meter, while new lettings averaged EUR 10.80 per square meter — figures Vonovia says sit below many freely financed offerings in the city.

Together with its Deutsche Wohnen subsidiary, Vonovia manages just over 130,000 apartments in Berlin, a combined footprint representing less than 8% of the entire Berlin housing market. Ahead of the upcoming state election, Mucic rejected calls to expropriate large landlords, instead banking on political reliability and expecting implementation of the expropriation ban agreed in July by the coalition committee of CDU, CSU and SPD. Stable framework conditions are widely seen across the sector as a prerequisite for future investment decisions.

Legal pressure mounts on two fronts

The political charm offensive has not shielded the group from the courts. On September 9, the Higher Regional Court of Hamm upheld an injunction brought by the German Tenants' Association, ruling that a clause governing electricity supply in residential leases — used by subsidiary Deutsche Annington Beteiligungsverwaltungs GmbH and Vonovia Energie GmbH — was inadmissible. Days later, the same court was the venue for fresh action: on Thursday, Environmental Action Germany (Deutsche Umwelthilfe) filed an injunction against Vonovia over obstacles tenants face when installing balcony solar panels.

Analysts turn cautious, and the shares feel it

Sentiment in the equity market has soured in parallel. On September 7, Goldman Sachs downgraded the stock from Buy to Neutral and slashed its price target to EUR 21.20 from EUR 29.50. The shares closed Friday at EUR 17.79, leaving them down 28% year-to-date and hovering just above the 52-week low of EUR 17.55 touched on September 15. Market capitalization stands at EUR 15.14 billion.

First-half cash generation takes the hit

Behind the muted valuation lie mixed interim figures. Adjusted EBITDA for the first half of 2026 rose 2.4% to EUR 1.46 billion, lifted by the rental business, which grew 3.5% to EUR 1.27 billion, and by the Value-add segment, up 27.6% to EUR 128.5 million.

The cash line tells a starker story. Operating free cash flow collapsed 45.4% to EUR 607.5 million in the six-month period, while adjusted earnings per share slipped 7.7% to EUR 0.91. Management is nonetheless sticking to its full-year 2026 targets: adjusted EBITDA of EUR 2.95 billion to EUR 3.05 billion, pre-tax profit of EUR 1.9 billion to EUR 2.0 billion, and an adjusted net result of between EUR 1.4 billion and EUR 1.5 billion.

The gap between strong demand for housing and the pressure on the group's valuation underscores how sensitively markets respond to regulatory uncertainty. Reliable framework conditions and sustainable rental income remain decisive for where the stock heads next.