VVOAnnual Report 2011
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Chief Executive Officer´s review

A year of hard work ahead, based on solid ground

VVO has had a strong year. A customer satisfaction survey in the autumn showed that 93 % of our customers have recommended VVO or would be prepared to do so. This high recommendation rate indicates that we are doing the right things in the right way. In 2011, we completed more than 1,000 new apartments in the Helsinki metropolitan area and other growth centres. There is a continuing need for rental housing and new apartments, as the average household size continues to decrease and urbanisation continues to advance.

In 2011, the general mood turned somewhat negative, while economic uncertainty increased. There were worries about the global economy and the European economy, Finland´s party political map changed profoundly, and consumers´ confidence in their personal finances declined. VVO, however, remains financially solid; our business is robust, and in the previous year we logged record growth in housing stock. Profit remained at the level of the year before. This good financial performance was enabled by increased demand for rental housing and other factors, such as low interest rates, effective rental services, longer tenancies and efficient maintenance.

Rental housing is becoming more popular as construction costs pose a challenge

Rental housing is becoming increasingly popular, as can be seen in the growing number of applications submitted to VVO, with 6.7 % new applications. The occupancy rate of our apartments improved on the previous year, to 98.3 %. I believe that demand for rental housing will continue to be strong in growth centres, where there is simply not enough rental housing to satisfy the market´s needs.

The key challenges in 2011 had to do with high contract prices. Construction was expensive. As a result the first VVO investment decisions of the year were not taken until October. In all, a start was made on only around 200 new rental apartments during the year. While there would have been capacity for a larger construction volume, we did not regard the launch of projects, which would have been too expensive for tenants when completed, as worthwhile. Construction costs are the most significant factor contributing to rent levels.

Due to increased maintenance costs for apartments and growing demand, rents are rising faster than inflation. In order to balance this development, it is vital to build a sufficient number of new rental apartments in growth centres. We are prepared to start work on building 450 new rental apartments this year, but could easily boost this number to 1,000 if construction costs fall. In addition to building new housing, we are seeking growth by purchasing existing housing stock.

The high cost of construction is due to a variety of factors. Building rental housing usually becomes attractive during declines in the owner-occupied housing market. It would be important to develop our national housing policy so as to ensure steady production of rental housing. Rental housing production is a collaborative effort alongside interest groups, with central government playing a major role. Incentives are the only way to increase rental housing production and encourage new actors to offer apartments for long-term leases. Development points include availability of plots, plot pricing, flexibility of local planning and construction regulations, housing benefits and increased competition in the construction sector.

Low interest rates facilitated success

Despite the uncertainty in the economy and restricted availability of bank funding, VVO performed well on the financing market. Financing expenses are a major expense item for VVO, and thus low interest rates have contributed to our good financial performance. Moreover, our debts are well hedged against interest rate rises, for the purpose of security of long-term profit and stability in rent trends.

Financial expertise will be a success factor for us in the near future. Interest rate margins on the short-term loans offered by banks are climbing, but businesses in the real estate sector need longer-term funding at reasonable rates. Accordingly, we are preparing to use not only bank loans, but also other financing instruments, such as guaranteed bonds, in the future. I believe that a company like VVO, with its low risks and high manageability, is an attractive prospect for investors.

We wish to become better

One of the secrets of our success is our internal development and the effectiveness of our organisation. Last year, this was apparent in the streamlining of the company´s management. New members were added to the Management Group, both from within our own organisation - through our J2 coaching - and from the outside.

Managing our rental services and building manager services ourselves is a strategic choice. We gain a business benefit from staying in touch with the customer interface and developing our own housing products and services: we can offer a service with which our customers are satisfied and which they are willing to recommend to others.

We have also invested a great deal in the upkeep of our existing properties, i.e. repairs and maintenance. During 2011, we introduced a maintenance operating system with the aim of ensuring good quality in property use and maintenance services, extending the life span of our properties, and improving residents´ comfort. Thanks to our successes, the rise in maintenance costs at VVO has been lower than average, and rent trends have been stable. This is apparent in the high occupancy rate of our apartments and a rate of turnover lower than our competitors.

A year of hard work ahead

We take a robust approach to improving our operations and have several ongoing development projects. In 2011, we evaluated our development efforts in relation to our strategic goals. We are now focusing on benefits for customers and our day-to-day operations. A year of hard work lies ahead.

Offering reasonably priced rental housing has become a major challenge in a world where costs are soaring. Our solid financial development provides us with a foundation for long-term renovations and for investments in new rental housing.

As the recently appointed CEO, I have been given an extremely warm welcome within the organisation. It is gratifying to join a company with highly competent personnel, active customers and shareholders who take the long view. It is important for me that we do well and do the right things: being cost-effective, leveraging our economies of scale, and ensuring that our residents enjoy making our apartments their home.

I would like to take this opportunity to thank our personnel, who have shown outstanding expertise and commitment to our goals. I would also like to thank our residents, our funding providers, our shareholders and our Board of Directors for the fine work we have done together during the year. We are all in the business of making homes.


Jani Nieminen
Jani Nieminen