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* 2016 FFO 1 760.8 mln eur vs Rtrs poll 759 mln
* Proposes dividend of 1.12 eur/share
* Vonovia says expects full integration of Conwert by July
* Confirms 2017 forecast for FFO 1 to rise to 830-850 mln eur
* CEO says no need to buy at inflated prices
FRANKFURT, March 7 (Reuters) - Germany's biggest residential real estate company Vonovia is planning to focus on organic growth and abstain from acquisitions in an overheated German market, Chief Executive Rolf Buch said on Tuesday.
"We don't need to buy at inflated prices," said Buch, speaking after Vonovia reported 2016 results and said it expects profits to rise this year.
Demand for German real estate has risen over the last years, with investors viewing it a safe haven and interest rates falling in some cases below zero. The arrival of more than 1.2 million migrants in 2015 and 2016 combined has added to an increased demand for housing.
Buch, whose contract was extended by five years on Monday, added that a potential acquisition of peer Deutsche Wohnen , which Vonovia tried but failed to buy last year, was not high up on his agenda.
Vonovia will instead focus on building new houses and on investments in the roughly 400,000 flats it manages, targeting spending more than 1.3 billion annually, albeit starting with 1 billion this year.
The company's vacancy rate fell by 0.3 percentage points to a record low of 2.4 percent at the end of 2016, while a general increase in property prices helped drive Vonovia's net asset value by 27 percent to 14.3 billion euros.
For 2017, the group expects core profit to rise to between 830 and 850 million euros, not factoring in earnings from Austrian property group Conwert, which it agreed to acquire in September and which has 60 million in core earnings.
Vonovia said funds from operations (FFO I), a measure of recurring free cash flow considered key for real estate companies, rose 25 percent to 760.8 million euros in 2016. (Reporting by Arno Schuetze; Editing by Victoria Bryan)