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RENTING

Reader question: How does Vienna’s rent control system work?

Vienna has some of the cheapest rents in European capitals, and a lot of it has to do with the strict rental controls in the Austrian city.

Reader question: How does Vienna's rent control system work?

Austria’s capital often shows up near the top on lists of cities with a high standard of living – and the affordable rents in the imperial city is one of the reasons why.

Vienna has a high share of its residents, some 60 per cent, living in municipal housing estates or homes subsidised by the city, according to the government.

Besides the more than 220,000 city apartments (also known as gemeindewohnung), many residents also live in genossenschaftswohnungen, cooperative housing built by non-profits with large deposits for apartments but reduced rents.

READ ALSO: The downsides of Vienna you should be aware of before moving there

The city’s subsidised apartments are part of a highly active policy from 1920 to 1938, during the period known as “das rote Wien“, with the Socialist Party ruling the city, and after the Second World War, until 1969.

However, there are other reasons for the lower rents in Vienna, especially since some private residences also have extremely affordable prices in the capital. 

One such factor is laws regulating how much landlords can raise rents, known as rent control. 

Rental controls in Austria

Austria has a history of more than 100 years of rental control, first established during World War I as protection of widows and orphans of soldiers against exorbitant rents.

READ ALSO: Property: How to find a rental flat when you arrive in Austria

The first regulations to curb rentals and restrict evictions were set in 1917. Still, they got stricter after the Second World War, when the Friedenskornenzins policy was instituted during times of peace, setting a maximum rent of 1 Shilling per square metre per month.

Incredibly, there are still some people living in apartments from those times, when 1 Schilling was the same as €0.072 – and yearly rental increases were also kept very low. Most of the famous cases of apartments in downtown Vienna costing tenants less than €400 a month can be traced back to “peace times” contracts.

Benchmark rent in Austria

Since 1994, though, a new system for capping rent was introduced in Austria, known as Richtwertmiete, or benchmark rent, as Immowelt explains.

This benchmark is valid only for apartments built before 1945 (in Vienna, a large share of the buildings are from before the war, known as Altbau) or, in some cases, before 1953, and they cannot be larger than 130 square metres. The rules can be quite specific, and you can check whether your apartment falls under rental protection in several administrative bodies and rental associations in your city.

In Vienna, the benchmark rent for old apartments that fall into the value protection agreement from 1994 is € 6.15 per square metre, a low value that was recently increased from € 5.81 on April 1st. This means that a 100-square-metre apartment would cost € 615 per month without additional costs such as VAT and living expenses if governed by the protection agreement.

The capital has the second-lowest benchmark rent in Austria, only higher than Burgenland (€5.61). Vorarlberg has the highest at €9.44 per square metre, followed by Salzburg (€8.50), Styria (€8.49), and Tyrol (€7.50).

Some apartments with rental contracts from before 1994 still follow previous rules, with even lower rents. They are put in different categories depending on appliances, location, size, and other factors and could be capped at as high as €3.80 per square metre in Vienna.

Austria also has a “right to succession” established in its Tenancy Law, stating that tenants who benefit from these low rents have a right to pass on the apartment to close relatives, such as children, grandchildren or partners. In those cases, rent can only be slightly increased – keeping prices low for decades on end.

What if my apartment does not fall into the benchmarked rent?

New buildings (Neubau) do not benefit from the capped rents in Austria. There are not many restrictions on rents for private properties. However, Austrian law has a provision covering “usury” or overcharging. Several rental associations can help you check if you are paying too much.

If an arbitration board finds that the rent was excessively high, tenants could claim retroactively.

READ ALSO: Tenant or landlord: Who pays which costs in Austria?

When it comes to rental costs, it is also essential to realise what each cost relates to and whether or not the property owner or the renter should be paying for it.

Most operating costs can be passed on to the tenant, including insurance, operational costs (such as electricity for lifts), and sewer clearing. However, some are not covered by Austrian law, and property owners need to pay for themselves, including repair work for burst pipes or damaged chimneys and connection to the public water supply network, for example.

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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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