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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?
Construction cranes on the site of a new building in Vienna. (Photo by ALEXANDER KLEIN / AFP)

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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Migration Economy: Who are the migrants starting businesses in Austria?

Self-employed migrants - or those building businesses in Austria - contribute hugely to the local economy, a new study has found.

Migration Economy: Who are the migrants starting businesses in Austria?

People born outside of Austria rely, in large part, on self-employment or opening up businesses (and then employing other migrants) as a path to working in the country, a study conducted by the Institute of Advanced Studies (IHS) on behalf of the Integration Fund (OeIF) found.

The study, Migration Economy in Vienna (Migrantische Ökonomien in Wien), also found that some nationalities tend to stick to specific industries – which could be partially explained by how migrants rely on informal networks of people of the same origin to start a business.

READ ALSO: Being self-employed in Austria: What you need to know

For example, people from the former Yugoslavia, Eastern Europe and Turkey often work independently in the construction sector. People from China are strongly concentrated in gastronomy, along with people of Turkish, Syrian, Thai and Maghreb origin.

Migrants originally from Asia and Africa, and especially India, Egypt and Afghanistan, are concentrated mainly in postal and courier services, including bicycle messenger services. Finally, the study found that people from Turkey and former Yugoslavia also appear more often than average registered as taxi drivers.

How much money do they bring in?

Figures from Austria’s Chamber of Commerce (Wirtschaftskammer) showed that business owners in Vienna with a migration background generate € 8.3 billion in revenue and create around 45,500 jobs. 

Plus, these companies pay around € 3.7 billion every year in taxes and duties.

Walter Ruck, President of the Vienna Chamber of Commerce, said: “Companies with a migrant background not only enrich the diversity of the corporate landscape in Vienna, but they are also an economic factor.”

READ MORE: Diversity and jobs: How migrants contribute to Vienna’s economy

Who are these migrants?

Part of the survey involved a qualitative research with migrant entrepreneurs in Vienna, but also a comprehensive quantitative data analysis of registered businesses.

Many of the entrepreneurs interviewed were first generation (meaning they were not born in Austria), and most were between 26 and 35 years old and male. In total, the small businesses surveyed employed two to a maximum of four employees, most of whom were related to the owner.

READ ALSO: EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

The entrepreneurs with a migrant background who were interviewed generally either did not have higher school-leaving qualifications (known in Austria as the Matura) or have not yet had their foreign certificates recognised in Austria and therefore do not work in their sector of study. 

First-generation migrants, in particular, tend to have lower educational qualifications, which has a negative impact on their chances in the labour market, the study said. Because of that, the respondents named a lack of occupational alternatives as one of the decisive factors for starting a business.

Additionally, many of the respondents said they relied on a network of people from their own nationality for help setting up a business. Many of them weren’t aware of the support offered by official bodies, including the Chamber of Commerce. 

READ ALSO: What is the new cost of living ‘credit’ for self-employed people in Austria?

The study concluded that language barriers and some cultural aspects played a role, but since most entrepreneurs were interested in getting more detailed information on starting and running businesses, there was potential for better communication and targeting by the public offices.

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