What will happen to Austria’s property market in 2021?

Despite a global pandemic and lockdown restrictions, Austria’s property market still performed well in 2020 with prices and demand rising. But what will happen in 2021?

What will happen to Austria’s property market in 2021?
Photo: DPA

The year has started with another lockdown and without the usual stampede of international ski tourists in the mountains.

However, experts are predicting another strong year for the property market, even with the ongoing uncertainty due to the pandemic. 

What happened in Austria’s property market in 2020?

Last year, the Housing Price Index (which measures residential property prices) in Austria increased during the third quarter to reach 139.23 points.

This was an all-time high and reflects the strong performance of the market.

According to Paul Gibbens, Property Specialist at Housebuyers4u, this puts Austria alongside some the top performing property markets in the EU.

“Germany, Luxembourg, Sweden, Portugal and Malta all registered above average price growth just like Austria,” he told The Local.

“Countries like Finland, Spain and France have all seen below average increases.”

READ MORE: Is it better to buy or to rent property in Austria? 

Gardens, terraces and chalets popular in 2020

Peter Marschall, CEO of Marschall Real Estate, specialises in the high end residential property market. It is a market which experienced a good year in 2020, particularly for properties with terraces and gardens.

“After the lockdown, many people realised it’s not nice to stay at home for weeks without outside space,” he told The Local.

“And lots of people are scared about the future so they want to put their money in a safe place, like residential property. We did very well in the second half of last year and we have started well this year, so we are expecting 2021 to be a good year for business.”

Similarly, demand remained high for ski property – chalets and cabins – in the Austrian Alps, according to Lindforth, a marketing company specialising in mountain property.

Maizie Delaney Baird, Property Consultant at Lindforth, told The Local: “Transaction levels have remained steady throughout the pandemic.

“The main impact has been travel restrictions, which means international buyers can’t travel to view the property they want to buy. 

“However, video viewings and virtual tours have worked well.”

Property market trends and hot spots in Austria

A key trend in 2020 was that investment in residential property outperformed the market for office buildings for the first time.

In fact, a Bank Austria report states that Austria’s housing construction industry was one of Europe’s highest growing sectors in 2020.

Investment in residential property is expected to stay high in 2021, which means there should be a continued supply to keep up with buyer demand in the future.

In luxury real estate, Marschall said they are seeing high levels of demand all over Austria, but buyers are especially interested in the Alps and the lakes regions.

“Kitzbühel is a hot spot for German buyers because it’s close to Munich,” he said. “We’re seeing a similar situation in the lake areas of Carinthia and Salzburg.”

“People want to own a second home in a nice area. The crisis has highlighted these areas to international buyers more than Vienna.”

Mountain property specialist Baird says the increase in demand in the Alps has coincided with clients prioritising their lifestyle when searching for a new home.

“Many people are self-employed or working from home, so working or running your business from your ski chalet is very attractive for our clients,” she said.

“Similarly, we are already seeing more interest in rental investment properties.”

A sign says 'home for sale': Image: DPA 

What can we expect from Austria’s property market in 2021?

While property experts are predicting a promising start to this year, there is a question mark hanging over the second half of 2021, depending on what happens with the pandemic.

“The overall picture tells us that the property markets in Austria and the EU are doing quite well,” explained European property expert Gibbens.

“But more people are losing their jobs due to lockdowns and businesses not having the finances to continue running. This could mean fewer people are able to afford to buy homes, which could lead to a change in property prices.” 

Luxury property expert Marschall also said the Austrian property market could be impacted later this year if there is further economic damage as a result of the pandemic.

“The crisis is not over yet and it might impact companies in the second half of this year,” he said.

“There is the possibility of more bankruptcies, which could impact wealthy people, so it’s hard to predict the market.”

However, Marschall said the pandemic has changed the reasons why people are buying property, with more buyers searching for a new home outside of city centres.

“More people are now buying a home in the surrounding areas of Vienna because they don’t have to go into the office every day,” he said.

A big question for 2021 is whether property prices in Austria will increase again. Baird thinks the continued high demand will ensure prices keep rising.

“Property prices have been steadily increasing in Austria for years,” she said.

“Of course no one has a crystal ball, but there is such a large amount of demand I can imagine prices will continue to increase.”

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Property buying rules for foreigners in Tyrol and Vorarlberg

While many countries have a north-south divide, Austria is often split between east and west, and it’s no different when it comes to property.

Property buying rules for foreigners in Tyrol and Vorarlberg

The west of Austria is home to the Alps and many famous ski resorts, making it a highly sought-after place to buy property – for both Austrians and foreigners.

But the popularity of this part of the country has led to skyrocketing prices and strict rules on who can and can’t buy property.

Thinking of investing in a home in Tyrol or Vorarlberg? Here’s what you need to know.

READ ALSO: EXPLAINED: The rules for buying property in Graz as a foreigner

Who is a foreigner in Austria?

Foreign nationals are defined by the Austrian Federal Government as people that do not have Austrian citizenship.

But when it comes to buying property, there are varying rules for different foreigners. This mostly depends on whether someone is from an EU country or not (rather than whether they have an Austrian passport).

Property buying rules for EU and EEA citizens in Austria

It can be easy for citizens from EU and EEA countries and Switzerland to buy property as a foreigner in Austria.

This is because these citizens are granted the same rights as Austrian nationals under EU law.

So this means whether you are an EU citizen already living in Tyrol or Vorarlberg as a resident, or you simply want to purchase an investment property in the Alps, then it is possible.

FOR MEMBERS: EXPLAINED: Property buying rules for international residents in Austria

Brits with an Article 50 card

For people with an Article 50 Card – a post-Brexit residency permit that grants Brits living in Austria before December 31st 2020 pre-Brexit rights – they are still treated the same as those from EU member states. 

But for any British people that have moved to Austria in post-Brexit times, they will be considered as third country nationals and subject to the rules detailed below. 

Nationwide property-buying rules for third country nationals

In Austria, the term ‘third country nationals’ refers to anyone who is not from an EU member state, an EEA (European Economic Area) country (Iceland, Liechtenstein and Norway) or Switzerland. 

For this group, it is usually more difficult to buy property in Austria – even for permanent residents – due to strict rules.

In principle, any permanent residents from a third country in Austria have to go through an authorisation process to gain a special permit that will allow them to buy property. 

The reason for the permit is to ensure there is sufficient housing available for Austrian citizens and to avoid surging property and land prices from interest by non-EU buyers.

But the rules for foreigners buying property in Austria are regulated by the Foreign Nationals’ Property Acquisition Act of each province, which is why they can vary across Austria.

READ MORE: Where to find property in Austria for under €100k

What is different in Tyrol and Vorarlberg?

In Tyrol and Vorarlberg, only EU, EEA and Swiss nationals are allowed to buy property as a foreigner. British people with an Article 50 card are also included in this group.

This means third country nationals are not allowed to purchase property in these states.

Innsbruck, one of Austria’s most beautiful – and expensive – cities. Photo: Photo: Wikicommons

Why are the rules different in the west of Austria?

In a bid to reign in the property markets in Tyrol and Vorarlberg, governments have introduced measures such as caps on the number of holiday homes in certain districts. Third country nationals are also prohibited from buying property.

However, this has led to some international residents being pushed out of the market, like a Serbian couple who were denied a permit to buy a house in Tyrol in 2021, despite living and working in the province for 20 years.

In Vorarlberg, there are also special laws in place to restrict where holiday apartments can and can’t be built to protect the local housing stock.

Likewise, a property in Vorarlberg can only be used as a holiday home within specially designated zones – a rule that applies to Austrian citizens and foreigners.

READ ALSO: ‘Concrete gold’: Austria ranks as Europe’s second most expensive property market

Other regional property buying rules and exceptions

While the west of Austria has strict rules when it comes to foreigners buying property, it is the opposite in some places in the east.

For example, in Vienna, the key difference is that if a married couple is buying property and one spouse is an Austrian citizen, they do not have to go through the authorisation process to get a special permit.

But for couples in Vienna where both partners are international residents, or non-EU individuals, the authorisation process still applies.

And in Graz, there is no requirement for foreigners to gain the special permit to buy property. This means, as long as someone is a permanent resident in Graz (and they have the funds), they can buy property – no matter where they are from.