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Is now a good time to buy property in Austria?

With reports that demand for property is falling in Austria, could now be a good time to buy? We take a closer look at the data to find out.

Is now a good time to buy property in Austria?
Austria's property market has been booming for two years, but there are signs that demand is decreasing. (Photo by Jacek Dylag on Unsplash)

Anyone planning to buy a home in Austria will be aware that prices and demand have been rising over the past couple of years. 

But Austrian broker association Remax is now saying that demand is falling with signs that “the market is starting to turn”.

In the first half of this year, 74,258 newly purchased properties were registered in the Austrian land register (Grundbuch). This is three percent less than during the same period in 2021, according to data from Remax.

FOR MEMBERS: IN FIGURES: Everything you need to know about who lives in Vienna

However, this figure is still 15.7 percent more than in the first half of 2019, which reflects the boom in the Austrian property market since 2020.

Also, despite the number of transactions going down this year, the value is actually up by 10.8 percent to €21.73 billion, which shows property prices are not yet coming down.

Bernhard Reikersdorfer, Managing Director of Remax Austria, said: “The growth was primarily supported by Vienna and Styria, but also by Upper and Lower Austria. 

“This means that real estate trading turnover has increased by a third in the first half of the year since 2019 and 2020, and more than doubled when compared to 2015 and before that.”

‘Inflation is driving up costs’

The Remax report says property market trends in Austria are being influenced by the Covid-19 pandemic, the war in Ukraine, inflation and the energy crisis. 

This has led to a change in prospects for some people, which is being seen as a drop in demand in the property market and a reduction of new construction projects on privately owned land.

READ ALSO: READER QUESTION: When should I turn on my heating in Austria this year?

Anton Nenning, Remax Austria expert, said: “Inflation is driving up the new construction costs – first through the material and now through the staff – and is now gnawing away at the equity capital saved for new acquisitions. 

“This means that many financing transactions that could be processed easily and cheaply a year ago are suddenly a case for selected experts who can still find a way even in tricky situations. For many, however, this simply means a project stop.”

As a result, the market for single family homes in Austria is heating up as they are sometimes cheaper than building a new property on private land. 

What is happening in Vienna?

Austria’s capital city remains the second best performing property region in Austria (behind Lower Austria). The value of all property sales in Vienna increased by one billion in the first six months of 2022, bringing the total to €6.68 billion.

Donaustadt is the best performing property market in Vienna with 1,903 properties sold, followed by Favoriten with 1,096. Donaustadt even overtook Graz and Kitzbühel to record the highest value in property sales.

The five largest real estate transactions in Austria also took place in Vienna during the first six months of the year. 

A plot of land (258,269 m²) in the 22nd district became the country’s most expensive property when it was sold for €86 million.

READ NEXT: Living in Austria: Is Vienna a family-friendly city?

What are the property trends outside of Vienna?

Vienna might be Austria’s capital city, but it doesn’t have the hottest property market in Austria right now. Instead, that title belongs to Salzburg and Styria.

Property sales in Styria are up by 9.2 percent and the overall transaction value has increased by 18.5 percent. In Salzburg, both sales and transaction values increased by 3.6 percent.

In the Alps though, the opposite is taking place with sales down by 10.7 percent in Vorarlberg and by 6.4 percent in Tyrol.

However, Tyrol is still recording some high prices (despite the overall decrease in sales) with the state’s most expensive property selling for €19.6 million in Kitzbühel earlier this year.

Lower Austria is currently the country’s best performing state for the number of sales, although the province recorded a decrease for the first time since 2013. 

The Remax report named Mödling as the most popular district for property in Lower Austria.

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PROPERTY

EXPLAINED: Is the construction ‘boom’ over in Austria?

Austria has seen a property and construction boom in the last few years. Will inflation dampen new investment in the sector? And what will it mean for the property market?

EXPLAINED: Is the construction 'boom' over in Austria?

Austria has seen an increase in residential construction in recent years. In 2021, the activity in residential construction was the highest since the 1980s, according to data from Statistik Austria.

Around 71,2000 flats were built across the country in 2021, which exceeded the already high level of the two previous years by 5 percent and is the highest result since the beginning of the 1980s, the data institute said. 

The provinces with more activity were Vienna (23 percent of all completed apartments were built there), followed by Upper Austria (19 percent), Lower Austria (17 percent) and Styria (14 percent). However, the province of Tyrol, in Western Austria, had the highest construction activity per inhabitant, according to the data.

FOR MEMBERS: Is now a good time to buy property in Austria?

Based on annual average population figures, about 7.9 apartments per 1,000 habitants were built in 2021 overall. 

The highest rates were registered in Tyrol (9.0), followed by Upper Austria and Styria (both 8.8). The numbers in Vienna include only new homes in new buildings – not any renovations to add apartments to already existing blocs.

Rising costs and fewer new buildings

However, inflation has also been felt in the construction sector, according to a separate report by Statistik Austria.

“In October 2022, construction costs for residential buildings were +7.6  percent, significantly above the October figure of the previous year, but down slightly by 0.3 percent compared to the previous month of September,” said Statistics Austria Director General Tobias Thomas.

The Austrian Institute of Economic Research (WIFO) currently expects the completion of new homes to stagnate this year and decline by 2 or 3 percent in 2023, according to Der Standard.

The reasons are inflation, higher construction costs, delivery problems and the new stricter lending guidelines that prevent some people from being able to borrow and finance a home, Wifo economist Michael Klien told the daily. 

READ MORE: EXPLAINED: How Austria’s new property buying rules could impact you

Austrian housing researcher Wolfgang Amann told Der Standard that, from 2024, the stricter rules would have more impact leading to a “massive drop” of 24 to 30 percent in the completion of single-family homes. 

From August 2022, anyone applying for a mortgage in Austria is subject to new rules related to equity and terms and conditions for loans, as The Local reported.

The most significant change to house-buying rules in Austria is that there is now a mandatory deposit of 20 percent of the value of a property, including additional costs. Previously, banks were simply issued with recommendations about a minimum deposit.

Additionally, the monthly loan instalment may not exceed 40 percent of the monthly disposable net household income, and the financing term may not exceed 35 years.

So, what will happen to the property market?

Peter Marschall from Marschall Real Estate in Vienna told The Local: “In one scenario, the political situation is not so bad and property prices and demand go down a bit but not dramatically.

“In the worst case scenario, the war in Ukraine is still ongoing or getting worse, the economy is bad and bankruptcies are increasing.

“The question is, how bad will it get? I hope not as bad as some people predict, but it’s difficult to see into the future right now.”

READ ALSO: EXPLAINED: What will happen to Austria’s property market in 2023?

Justin from Amazing Austria told The Local that he expects prices to fall across the entire property market in Austria next year. However, it might increase transactions in some segments.

Justin said: “Predictions for 2023 are that the market will definitely slow at the lower end.”

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