SHARE
COPY LINK
For members

PROPERTY

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

Austria’s property market reached new highs in recent years, but has it passed the peak? If you're planning to buy property in the Alpine Republic, here's what you need to know.

EXPLAINED: What will happen to Austria’s property market in 2023?
Experts are pessimistic about the property market in Austria in 2023. (Photo by Chavdar Dimitrov / Pexels)

Austria’s property market has been booming over the past couple of years, but could the bubble be about to burst?

As inflation takes momentum out of the market and rising interest rates make mortgages more expensive, real estate agents are starting to report a slowdown in transactions. 

This comes as Austria reports the biggest increase in bankruptcies in Europe amid warnings of a possible Europe-wide recession. 

TELL US: Have your say: Where are the best and worst places to live in Vienna?

So what does this mean for people hoping to buy property in Austria? And what is the forecast for the market in 2023?

The Local spoke to property experts to find out what will happen to the market next year.

What is happening in the property market right now?

In the latest report by real estate agent Remax, sales of single-family homes were at the lowest level in Austria since 2014 during the first half of 2022.

And overall, property transactions were down across the country when compared with the same period in 2021.

However, despite sales slowing down, prices are continuing to go up with the price for an average single-family house in Austria now reaching €347,000 – an increase of 13 percent compared to 2021.

Rising prices means the dream of owning a home is becoming out of reach for more people, as recognised by Bernhard Reikersdorfer, Managing Director at Remax.

Reikersdorfer said: “Due to the sharp rise in the cost of living, inflation, rising interest rates and the tightening of credit procurement, the number of people interested in a single-family home who can also afford to buy it has fallen significantly.”

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

An example of this is the Kitzbühel district of Tyrol where the average price of a family home is now €2.375 million and the price for small apartments typically start at €500,000.

In contrast, Burgenland remains the cheapest province to buy a house in Austria where the average price for a family home is €192,308. Although prices are going up across the province and Remax believes 2022 could be the last year that the average cost of a family home in Burgenland is below €200,000.

Also, since August, anyone applying for a mortgage in Austria is subject to new rules related to equity and terms and conditions for loans. This means there is now a mandatory deposit of 20 percent of the value of a property, including additional costs.

While the aim of this new rule is to take some heat out of the market, it means people with less money will find it harder to get on the property ladder, especially in areas with high prices.

The beautiful Tirolean countryside, with the lights of a village shining bright. Photo by Matthias Betz on Unsplash

Tyrol is one of the most popular places for a second home – which is perhaps why it is so hard to find one there. Photo by Matthias Betz on Unsplash

What are the property experts saying?

Austria has long been a popular location for holiday homes, especially in the mountains. But real estate agents have noticed big changes in the past six months – due to both changing legislation related to second homes and the cost of living.

Justin Fields, Director of Marketing at Amazing Austria, told The Local: “The market in 2022 has nose dived. We still get interest in our mailout property offers, but the English speaking markets are sitting tight at the moment. 

“We have found that those with homes or apartments in Austria are selling up. This has been caused by the new regulations on property use, with many no longer allowed to be rented for holidays – only long term – which of course only appeals to the local markets.”

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

However, some buyers are finding ways to work around new regulations, such as turning an Austrian property purchase into a business.

Justin said: “If there have been any hot spots it has been with those clients wanting to live in Austria and run a business in an apartment house, in either the lake or mountain areas. We have seen good interest from this side.”

Peter Marschall from Marschall Real Estate in Vienna also told The Local that the luxury property market has taken a hit this year.

Peter said: “The past two years were very good and 2021 was our best in history, which was a surprise in the pandemic. The first half of this year was not very good but the market has picked up now and there are some good deals.”

He added that geopolitical situations and economic factors are influencing the market in Austria, with people thinking twice before making a purchase.

Peter said: “Due to the war in Ukraine, people are not ready to make decisions quickly like before. The increase in interests rates is also having an impact, followed by inflation.

“Plus, lots of people bought property in the last two years, which isn’t common, unless you’re an investor.”

READ MORE: Property buying rules for foreigners in Tyrol and Vorarlberg

Property predictions for 2023

So what is in store for 2023 for the property market? Will there be a glut of cheaper homes on the market? Or will the prices stay high?

Justin from Amazing Austria told The Local that he expects prices to fall across the entire property market in Austria next year. Although it might not result in an increase in transactions in all segments.

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

“But as is always the case, those with enough money at the high end of the property market will find a bargain as the €1.5 million home might reduce to €1.25 million.”

According to Peter from Marschall Real Estate there are two possible predictions for the property market in 2023.

Peter 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 are predicting but it’s difficult to see into the future right now.”

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

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.”

SHOW COMMENTS