Dear ladies and gentlemen, welcome to the conference call of TAG Immobilien AG regarding the publication of the interim statement Q1 2022. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by the zero on your telephone for an operator assistant. May I now hand you over to Martin Thiel, CFO, who will lead you through this conference. Please go ahead.
Many thanks, and good morning, everyone. This is Martin Thiel from TAG. Many thanks for dialing in for our Q1 2022 conference call. As always, we will go together with you through the presentation, try to make it comprehensive, and of course, after that, we have enough time to discuss and to answer your questions. Let's start with page number four, which is the highlights slide, and start with the operational development in Germany. Looking at the vacancy development in the Q1 . Well, first of all, we saw something that we've seen also in the past. That means a slight increase in the vacancy rates in our residential units. In this case, slightly up by 20 basis points from 5.5% to 5.7%. A kind of seasonality that we see now for years.
I think that's important to mention, already after the balance sheet date, we've seen a reduction vacancy rate. The number from April was 5.5%. Number from May was around 0.3%, our current vacancy rate. Already we are in a reduction of vacancy rates in 2022, and we are, in this regard, very optimistic that 2022 will be a very good year in this regard. Looking at like-for-like rental growth, I would say that basically unchanged to the previous financial year. We are even a little bit better, especially looking at the total like-for-like rental growth, including vacancy reduction, which stands at 1.5%. Perhaps you know that the guidance is for the full year 2022 between 1.5% and 2%.
With the expected further reduction in vacancy in the next quarters, that should be very much achievable. FFO I is up 5% year-on-year and came out at EUR 47.8 million. Also compared to the previous quarter, which you see on this slide, that ended with EUR 44.5 million. That's an increase. A quick look on EPRA NTA and LTV. Already at this stage, we will come back to that later in more detail. We saw now an EPRA NTA of EUR 24.13 and LTV of 47.3%. Both developments mean the reduction in EPRA NTA and the increase in LTV are purely the result of the ROBYG acquisition, which we accounted for for the first time at the March 31st.
In the Q1 of 2022, there have been no portfolio acquisitions in Germany. We disposed some non-core assets in Germany, 321 units all in all, and mainly around Burgwedel. Coming to the next slide and looking at our business in Poland. First of all, it's important to mention all the figures that you see regarding the P&L in Q1 2022 exclude ROBYG. The first-time consolidation for Robig was at the March 31st, 2022. That means that the balance sheet already includes ROBYG and the consolidated LTV includes ROBYG, EPRA NTA includes ROBYG, but no numbers in the P&L include Robig. This will be the case now from the Q2 onwards.
Therefore, the revenues from sale of properties were quite small, as this is now purely the still remaining and, in the meantime, quite small sales business from our first subsidiary, Vantage. There will be more than, of course, in the Q2, Q3 and Q4 when we now fully consolidate ROBYG. Looking at the total pipeline that we have in Poland, you see the significant increase now after the first-time consolidation of ROBYG. All in all, roughly 25,000 potential units that came now into our group. If you look at the total numbers, which is here presented in the column total Q1 2022 at the pipeline numbers, we've got nearly 90,000 units or potential units as land bank and under construction already for the rental business. For the sales business, roughly 18,000 units.
That brings us to a total pipeline in terms of units of around 37,000 units. That translates into a GDV for the Polish portfolio of a little bit more than EUR 1 billion. Effectively, this means that when we look at the land bank that we already own, there's absolutely no pressure on us to do now significant acquisitions in the future. You know that our midterm target is to have 20,000 residential for rent units in Poland in the next six to seven years. Basically, we are all already there, at least in terms of land bank units. Of course, we have to construct all these units in the next years. In this market environment, I think it's good to say that we can really now be selective with our future acquisitions.
Yeah, as I said, ROBYG, the transaction closed at the March 31st. Final equity purchase price, we already communicated that was around EUR 540 million. Let's take a look at page seven, which is the income statement that includes Germany and Poland, and again, Poland, excluding Robig, because consolidation was then later. A positive development in the net rental income, which is still coming more or less only from Germany or the Polish part is still very, very small. We had improved rental income and also lower maintenance cost of EUR 1 million in the Q1 .
Please don't take this as a kind of trend that we reduce now maintenance costs, and we see something similar when we discuss the CapEx development, which was also lower than in the Q1 of 2021. Maintenance as well as CapEx is nothing that is extremely stable quarter on quarter. We expect that we are in the course of 2022 on the same maintenance and CapEx levels than in the previous year. Of course, we also see in these items cost inflation, so therefore, a reduction for the full year 2022 is nothing we should expect. Where reduction is already observable is in the personnel expenses, especially looking at our German business.
We had here a reduction quarter on quarter of EUR 2.1 million, where the largest part is coming from the German business, as I said. What have we done here? During the course of 2021, we had some internal changes in our organization structure, mainly referring to a customer service department at the shared service center, where we were able to reduce our head count in this department and to operate the portfolio more efficiently. This is of course good to see that we already have a purely visible FFO impact in the Q1 2022 from this. There was no valuation, as always, at the end of the Q1 2022. The next valuation will follow, as in the past years, in the middle of the year, meaning on the June 30th.
You know that we had, like the whole sector in 2021, a very strong valuation uplift. We ended up at a 9% pure valuation gain in 2021. We have not really reliable estimates, final numbers, something like that for the half year. If you ask us, well, what should we expect? First of all, clearly we expect further valuation gains in the course of 2022 and also the first half. Is it as strong as in the first half 2021? We're a little bit careful around that, so that should be a good result. Of course one has to observe how interest rate environments develop in Germany. We're convinced that should have a dampening effect. We are far away from any drop in values.
Personally, and I think that's nothing really new, what we're discussing here, we expect that the yield compression that we've seen in the past years should come more to a level which is more sustainable and which is then also something that we simply prefer. If this is then a continuous slight increase than this strong increases that we had at the end in the past. Yeah, in total consolidated net profit amounted to EUR 32 million, out of which the largest part was coming from Germany. The Polish business, again, excluding ROBYG, with a slightly positive result of EUR 1.2 million.
Page number eight shows the EBITDA, FFO, and AFFO development. Good to see that the EBITDA improved by EUR 4.5 million, mainly as a result of higher net rental income and also better service results as well as the lower personnel expenses. That's something that we already discussed. Financing expenses were roughly on the same level as in the previous quarter, and we had EUR 1 million higher cash taxes. That led to an FFO increase quarter-on-quarter compared with the previous quarter by EUR 3.3 million. If you look at the results of operations in Poland, that was EUR 1.3 million negative. Why is that the case?
You see here a higher than usual tax effect that reduces the net income from Poland, which has been EUR 1.2 million now to the EUR 1.3 million result from operations from Poland. That's something that is not unusual in Poland to have here a time lag between realization of revenues and the point in time where, under Polish GAAP or under Polish tax law, the income taxes are due. Meaning if you hand over apartment in the Q4 , then in the Q1 of the following year, there's a kind of formal authorization act still with the buyer that leads then to the point in time where income taxes are due.
Good sales result in the Q4 means not a tax expense in the Q4 in my example, but a tax expense in the Q1 of the following year. This is what we see here. Of course, for the full year, we expect a quite strong result operations Poland. We will discuss the guidance later. This is something just temporary. Next page number nine shows the EPRA NTA development for 2021 and for the first quarter 2022. Well, I mean, the other effects that you see in the Q1 is more or less the ongoing result. We saw a reduction of EUR 1.65 per share coming from the ROBYG acquisition, which is basically the ROBYG goodwill.
The Robig goodwill was not written down, so we have in the balance sheet a goodwill of roughly EUR 214 million, but you know that this is excluded from the EPRA NTA calculation. Again, we account for the ROBYG goodwill, of course, as an intangible asset in the balance sheet. The amount is roughly EUR 240 million. For purpose of the EPRA NTA calculation, we have to exclude this goodwill, and therefore we have seen this reduction in EPRA NTA from the ROBYG acquisition. Page number 10 shows the financing structure. I already mentioned that the LTV is now slightly above our LTV target.
LTV came up 400 basis points higher than in the previous quarter, which is the consequence of the purchase price payment for ROBYG, which was done from the bridge loan that we had in place. Let me clearly state that the 45% LTV target is unchanged, so the 47% should be something temporary. We also see in the maturity profile the bridge loan included, and all the numbers coming from averages or referring to average maturities, referring to average interest rates include this bridge loan of EUR 540 million at March 31, 2022. Basically, it's unchanged what we said already at the beginning of the year. The clear plan is to take out this bridge loan in the course of 2022 via capital market transactions.
The bridge loans, just to remember, that matures at latest in July 2023, so that's still more than one year maturity. Quick look on page 12, which is an overview of the portfolio. In the meanwhile, the total GAV after the first term acquisition of ROBYG grew to EUR 7.5 billion, out of which roughly EUR 1 billion is from the Polish portfolio and EUR 6.5 billion is from the German portfolio. Page 13 shows the split of like-for-like rental growth. As I already said, slight increase in like-for-like rental growth, including vacancy reduction. Excluding vacancy reduction, we came out at 1.4%.
If you look at the distribution that's on the of this like-for-like rental growth that's on the bottom left of page 13, you see that this is, yeah, something like in the previous quarters. Still a small impact from modernization surcharge. The main part of the rental growth is coming from tenant turnover and from rent increases for existing tenants. That leads to the fact that we still only had to invest EUR 19.4 per square meter. You see this on the top right, which is absolutely in line with what we had spent in the previous years. Again, important to point out, as you know, we have published our decarbonization strategy with the full-year financial figures.
Midterm, over the course of the next year, you should expect that these investments are going up to EUR 25 roughly to get our portfolio climate neutral by 2045. It's not a massive increase. That's something which is very much doable for us. Of course, the impact from the modernization surcharge on our like-for-like rental growth will increase as we're simply spending more to reduce our CO2 emissions. This leads then to the potential higher rent increases in the course of the next years. Page 14 shows the development in vacancy rates in our German portfolio. I think we've already discussed this. Once again, good to see that vacancy in May 2022 is already down to 5.3%.
Just some words on our Polish portfolio and our Polish business that's shown as an overview with a lot of hopefully helpful numbers on page 16. In total, the pipeline for our Polish portfolio now adds up to more than 37,000 units with our two platforms, currently Vantage and ROBYG in Poland. It's the clear plan to combine these two platforms so that we have one combined entity, one platform in Poland. We are right now in the, yeah, middle of the integration process between Vantage and ROBYG. This is very much on the way, and we want to complete this process in the course of the year. We're very proud and very happy that we have here really the possibility to combine two very successful teams in Poland to create, hopefully quite soon, Poland's largest residential landlord.
Looking at the Polish market, I mean, how's the situation currently? It's clearly challenging. Not really new is the topic of construction price inflation. We can tell you that until now the construction sites are still running, and it's basically in plan. I mean, of course, there are bottlenecks in the supply chain visible, but so far our teams in Poland were always able to manage that. Of course, it gets more and more difficult the longer the war in Ukraine takes. For now we are quite satisfied with the development in Poland. Short term, this war has clearly, yeah, a risk for us. Midterm, I mean, it's hard to say this, but we are convinced that this has, for us and for the Polish market, a positive impact. Where is this coming from?
Well, at the moment, we see a huge inflow of people into the Polish market. If the press articles and the announcements are correct, more than three million people from the Ukraine have already entered Poland. For a country with 38 million people, that's of course a massive inflow. It's clear not everyone will stay after the war in Poland. If only a certain percentage of that people stay in Poland, that's extremely helpful for the Polish economy, firstly. Secondly, of course, it creates strong demand for the Polish residential market. Therefore, we are convinced that the market will see a very good development in the past years. What we already observed is a very strong demand for the rental business in Poland. Selling apartments, of course, in an environment with higher interest rates is something that will be more difficult.
Is this really a problem for us? That's not really a problem because you know that our main focus is on the residential rent business. If we need to even convert more projects into residential rent projects, that's of course something we can do. We're here quite flexible to it. So far, again, we don't see really very negative developments in the market, but we have of course to closely observe that. Again, the midterm outlook in Poland is from our point of view, very positive. Page 17 shows again the current projects already on offer. The vacancy rate of 2.9% confirms what I have already said. Demand for rental product in Poland, not only because of the refugee wave from the Ukraine, also because of other trends, is extremely strong.
We're very happy that the first projects were as planned and even a little bit better. Yeah, final look on page number 19 on the guidance FFO and dividend, and that's unchanged, so we're still guiding. If you look at the numbers, it's, I think, fair to say that we're in good way for an FFO I of, in the midpoint, EUR 190 million and an FFO II, including the business in Poland, of, in the midpoint, EUR 250 million. That means roughly EUR 60 million is the expected results from operations Poland now from the Q2 onwards, including the new ROBYG acquisition that will translate into a 32% increase year-on-year.
To create the FFO development, which is in 2022, still from the German business, that will be a 5% increase year-on-year without any further acquisitions or without any further disposals. The dividend guidance stands unchanged at EUR 0.98. That's as in the previous years, 75% payout from FFO I. You know that we've paid out, last week EUR 0.93 per share dividend for the financial year 2021 after our AGM. That's it from my side as an overview of the Q1 2022. Many thanks so far for listening and of course, now we are happy to take your questions.
Dear ladies and gentlemen, we will now begin our question-and-answer session. If you have a question for our speakers, please dial zero and one on the telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. We have a first question. It's from Sander Bank of Barclays. The line is now open for you.
Hi team. Good morning, and thanks very much for that. Two questions from my side, please. First one is on the LTV, which obviously now is above 45%, which I guess was broadly expected. Can you give us an update on how you think to bring that down, going forward? In connection with that, an update on your thoughts on the bridge financing for ROBYG? That would be the first one. The second question is related to Poland. I just wanted to get a bit more clarity on how you think about your FFO II development over the next, say, nine months.
How FFO II for ROBYG was basically in the Q1 , but also in your commentary that basically mortgage rates are increasing obviously in Poland, which could potentially have an impact on your development completions, et cetera, whether you wanted to hold or to sell. Can you give us a sense of how much more expensive flats have become for people? And if you wanna get a mortgage rate, what would you be paying now for a flat compared to say, for example, six months ago?
Yeah, of course. Happy to do so. Good morning, Sander. I'll start with the first question regarding the LTV development. Yeah, it's correct. The LTV stands now at 47%. Well, if we pencil in, let's say a slightly reduced valuation gain just for illustration purposes compared to last year. If you assume some asset disposals in Germany, which we're already planning, which are, I would say on the way, so should expect massive disposals, but perhaps something in the volume of EUR 150 million, more than normally and basically already at our LTV target of 45%.
Regarding your question of the refinancing of the bridge loan, well, in general, we always said the Polish business is something as we expect and already see in the first project high yields that absolutely also justifies equity contribution. And here I'm talking more and more generally, you know that we are investing. If we look at the residential for rent pipeline, EUR 2 billion in Poland over the next six to seven years, is this something that we want to do completely debt finance and want to keep the LTV just with the help of valuation gains on the level where it is? That would not be our style. On the other side, you know that we've been always very careful with our equity.
I mean, the last capital increase at TAG is now 10 years ago, also at that time in 2012 in connection with our acquisitions. Therefore, it's something where we clearly think a lot about it, where there's always a plan B. Plan B would be even more disposals, whether this is in Poland or whether this is in Germany. You should expect that, as I said, in the course of 2022, we will refinance the bridge loan, which matures in July 2023. Clearly we will not wait until the very last day for that. Looking at the FFO II development.
Well, for 2022, the good thing is, I think 98% of the units that are planned to be handed over in 2022 are already sold. There's not really anything at risk for FFO II guidance for 2022. The constructions are all the way, contracts are signed. When we talk about, for example, reduction in sales, if this would be the case in the next quarters, we're talking more about sales results for 2023, 2024. How is the situation in Poland? Interest rates have significantly increased. Any private buyer that takes on a mortgage is facing today interest rates of 7%, 8%. That's a quite strong increase compared to, for example, last year.
I mean, it's fair to say that should have a reducing effect in sales. We would be surprised if we see in the next quarters not any effect on that. On the other side, what is still absolutely there is the demand for people to live in new apartments. If buying an apartment is less an alternative than renting apartment is even more becoming popular. Therefore, it would be really supportive for our strategy to rent out apartments. As I mentioned some minutes back, I mean, of course, you see we've done a preliminary split of our portfolio leading to the 20,000 residential for rent units and still a significant sales pipeline of around 18,000 units.
If we see the demand from the rental business is stronger, the apartments are not that different. Doing here some conversions into residential for rent products is not really something complex. Also a reason why we did the splits in the past was that we were careful and thought, well, perhaps, I don't know, 500-700 units renting in one location is perhaps a little bit too much for the market. Let's in this micro location perhaps do a split and also sell some apartments in this specific location. If there's more demand from the renter side, yeah, of course, we can do more. Therefore, it sounds a little bit contradictory, but this rising interest rates in Poland is not necessarily something negative for our business.
Okay. Just to slightly follow up or maybe push you on that a bit. I guess this comes back to funding, and to some extent, you're saying like, look, we need to refinance the bridge loan, and you're gonna do that this year. I think you kind of allude to the fact that some equity component could be required. So basically, A, would you consider to do that at current levels? And slightly related to that, to the extent, I totally get the point that obviously mortgage rates increasing and therefore you're looking to do more for rent, given that there's still demand to live somewhere. I totally appreciate it. That again will probably require additional funding because yeah, you can't just debt finance a whole build to rent portfolio.
Just trying to understand like the various moving parts and how you're thinking about balancing that.
Mm-hmm. Perhaps to make that clear, when I'm talking about changing in some project the proportion between residential for rent and residential for sale, we're not talking about any cash inflows, cash outflows for 2022. We're more talking now about the next two or three years, so 2023, 2024 and onwards. For 2022 from the ongoing investments in Poland, basically that's funded. That's cash we have in the balance sheet, and that's cash that we receive, of course, with the business in Poland, especially from the handovers from ROBYG. That's more a midterm outlook I try to give. You shouldn't expect that we have additional huge funding needs in 2022 because of this change.
Again, I just wanted to give an outlook on how we can react if sales in Poland become more difficult. The Q1 was not a bad one in terms of sales, also at ROBYG. We've been right in our plan. When we look into the future, I think this is something that one should look at.
I understand for 2022 is fine, but thinking about just beyond 2022, if you were to decide to do more for rent, then obviously that does require extra funding, because you're keeping it back on your balance sheet. How are you thinking in terms of funding that not 2022, but 2023, 2024 onwards, given that, given where mortgage rates are, basically?
Yeah. I mean, you're absolutely right. That would require more funding from our side, and that would require funding via unsecured debt. That's what I try to refer to at the beginning. We're convinced that over the years, the Polish business really justifies equity, and we want to do this in a prudent way. We don't want to weaken our financial metrics. We are clearly committed as well to our investment grade rating. Looking mid to long term, this is clearly something that we would take into account.
Okay. Thanks very much.
The next question is by Thomas Rothoeuser of Deutsche Bank. The line is now open for you.
Morning, everybody. One question actually on how to fix the capital structure in, let's say, in the midterm, beyond 23 as you refer to. I mean, you mentioned disposals as one option. Maybe can get a bit more color here, what you expect here. Is it straight asset disposals or is it also joint ventures, or are there any other alternatives you can see?
Yeah. Good morning, Thomas. Our idea is very clear, and we're talking about straight disposals. I know that some companies are currently thinking about joint ventures. Don't know exactly the thinking in these special situations, but we would prefer always a clear solution. I mean, TCG has done property management for third parties in the past as well. I mean, that's now some years back. If you manage a portfolio purely on your own, if you manage a portfolio together with a joint venture partner, I mean, the topic of conflict of interest is always there. You need perhaps to set up different systems. That creates quite a complexity. I mean, with no doubt that the investment market in Germany is strong and will be strong also in the next years.
Why not realizing that directly? I think it's not necessary for us to give you signs to the market that we could sell at potential leverage and try to keep something in our balance sheet as well as a proportion of the portfolio to be sold. For now, for us, it's clear that we're talking about direct sales of assets and potentially also about sales if this is necessary, increased sales in Poland, for example. Regarding the land bank, because this is really a big asset that we have in Poland, this land bank that we have acquired with the help of our Vantage team in the last two years, and that we have acquired now with the ROBYG acquisition.
Okay. Maybe a second question on Poland. I mean, you also have supply constraints and higher construction costs, plus, I mean, you referred to potentially lower demand on higher market rates. What can we expect here, looking ahead, or what is your assumption? I mean, I understand this year is safe. Most of it is locked in, but looking further ahead.
Yeah. I think what we expect is that inflation is plateauing to a certain extent. This topic of construction price inflation in Poland is not really new, that's not something new in Q1 2022. We've already seen this basically since we are in the market, which is two and a half years ago. I mean, until now, sales prices have increased and rents have increased. We're still expecting the margins and yields that we communicated from the beginning. Good thing is, if you look at those margins and gross yields, 7%-8% gross yield on our rental product, a gross sales margin of 25% that we expect long term. I mean, there's definitely a buffer.
If we are in, I don't know, one or two weaker years, that would be still a good result. Please remember that, for example, ROBYG had a nearly 30% gross margin, which was extraordinary in 2021. Therefore, we are not concerned. This is absolutely not the case that now our business plan assumptions, our results for Poland, are changing. I mean, you know us, we are looking really into the future, perhaps a little bit more conservative. This was or is the case or has been the case in Germany for years, leading to the fact that we were not that aggressive with acquisitions in the past. Now we've set the foundation for our growth in Poland. As I said, it's not any more necessary to expand the acquisition business in Poland now extremely.
That's a good thing. Therefore, just wanted to give a clear signal that we're very well aware of the situation, that until now, everything is in plan, but we of course are aware and observe closely what is happening in the market.
Maybe one other question on Poland and actually on the letting performance. It seems like you're doing quite well with the first project. Maybe you can share your experience there.
Yeah. I mean, the results have been indeed very good, and it would be good to have even more letting apartments already on the market because additionally there was this or is this strong demand from people from the Ukraine, and a lot of them are also renting apartments in the segment where we are in, which is, you know, not a luxury segment, but clearly I would say mid to perhaps upper end of the market at EUR 10, EUR 11 or EUR 12 per square meter average rent. So, the demand is extremely strong. Yeah, it's a fact we have to accept that we are under construction and that towards the end of 2022, in the course of 2023, we will have more completions, and we expect that the renting process is quite quick.
What we know in Poland is that the pre-letting ratios are not very high. Looking into our experiences from the first projects and people really want to see the more or less finished apartments, and then they sign a contract and move in quite quickly, and that takes them few weeks and then they move in. We have also in the meanwhile, the first tenants that extend their contract, which is good. I mean, you know that Poland is an unregulated market. The typical contract is a one-year contract, so the first contracts are expiring now in May, June this year. They have signed one year ago. People are happy to extend this, which is also good.
The fluctuation rise rate, the turnover seems not to be too high, as these people know that it's difficult for them to find an appropriate apartment on the market. All the signs that we see here from the letting market are really, really positive.
Maybe last one on leverage. I mean, if we look at leverage in terms of net debt to EBITDA, I mean it's above 14x. Looks relatively high. I mean, what is your target here?
Just thank you for this question because then I can point out perhaps more the development. You know that we've been at net debt to EBITDA of, let's say, around 11x one or two years back. What is the reason for the increase in net debt to EBITDA? These are clearly our investments in Poland, which lead then to a sequencing, which is in year one and year two, the investments coming then along with higher debt. We're building the apartments and then we are renting out the apartments after 18-24 months of construction. In this time, 2022, 2023, when the most part of the portfolio of the letting portfolio is still under construction, it's very natural that this net debt to EBITDA is around 14x-16x .
We expect once we are more in the yielding phase, and the yielding phase is then perhaps in two years from now on, much more visible, this will quite quickly come down. I think it's for us really good to know that in a world, an environment where people, for good reasons, look more at net debt to EBITDA ratio, our ratio quite quickly will be in good shape as we simply own a portfolio with high yields, with good cash flows. Looking then into a time where the largest part of the portfolio is in Poland is yielding, I mean, the net debt to EBITDA ratio should be again on levels that we have seen in our portfolio before we started in Poland, which is more than perhaps something around 11x .
Okay. Thank you.
The next question is by Manuel Martin of Oddo BHF. The line is now open for you.
Good morning. Two questions from my side, please. It's a follow-up on Poland. I mean, how would you describe, or could you give us a flavor on how the mood is in Poland when this country is a neighbor country of Ukraine where we have the war? Doesn't this impact somehow the mood of people working there? That means, maybe craftsmen leaving the construction site and going to Ukraine to fight. What about inflation and salaries? Could there be a kind of spiral?
Well, very clear when we talk about construction price inflation, we are not talking about bottlenecks of craftsmen, extremely strong labor inflation. I mean, the growth of salaries in Poland has been quite strong over the last years, in line with good GDP growth. That's unchanged. When it comes to construction price inflation, we're talking about increased material prices. Examples are the material where, for example, oil is needed and oil is normally coming from Russia or from Belarus. That's where the construction price inflation or the higher construction price inflation is coming from. Yeah, of course, there are for sure cases where people on the construction sites come from Ukraine are now returning to their home country.
At least in our construction sites, our companies, that's not really an issue. We're talking here about of course cases, but not a trend. As I said, to the contrary, I mean, this massive inflow of people from Ukraine into Poland will lead to the fact that there are simply also more workers available. That's something that the Polish economy needs, like by the way, also the German economy would need. Even in Poland it will be more pronounced. I mean, it's always hard to say that one is benefiting from a war, but for Poland, we are convinced that this is midterm a positive development.
Okay. I see. My second question would be on your strategy in the Polish development activities that you have. I mean, suppose that supply chain disruptions become worse and you have a lack of material. Which strategy would you try to do? Would you focus more on build to hold or on build to sell? Any idea on that? Or would both ways suffer?
As I said, it could be the case that we put even a little bit more weight on build to hold. Again, for now we're still in plan, so there's not a decision taken. Just want to make clear that we are really flexible in that regard. I mean, again, this is not the case today, but if we would see where construction price inflation is even stronger, there are problems in supply chain. I mean, then of course we would postpone the start of certain projects at stages that should be natural. This is not the case yet, to say this very clearly. We are long-term investors in Poland. For us and for shareholders, it's important that we do that really in an efficient way and that we don't overpay for construction contracts.
I mean, at least this is the opinion of our colleagues in Poland. We already observed that this construction price inflation is plateauing. A further increase, or at least not a further strong increase is nothing that we expect as of today. Let's see how this develops. Perhaps already in the course of the next quarter or the quarter thereafter, we can give you here more insights and perhaps potentially also re-report on here some, in our sense, positive developments.
Okay. Thank you very much.
I don't know if there are further questions, so I would kindly ask the operator to answer that. I'm not sure whether we have none.
I hand back to you.
Okay. Sorry. There have been some technical problems. Is it correct that there have been no further questions so far?
No further questions so far.
Okay. Thank you very much. Yeah, thank you all for listening to the call and for your questions. As always, if there's anything else, please feel free to contact our department or me directly. Happy to answer these follow-up questions. Many thanks again and have a good day. Talk soon.
Dear ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.