It’s no secret that the economic situation for most of Europe has been rocky for the past few years, with inflation becoming a particularly persistent problem in Austria.
But how long is this expected to last? And could it soon be a good time to make some big purchases, like investing in property?
We take a closer look at the economic situation in Austria and short-term predictions to find out more.
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Economic outlook for Austria
A recent market outlook by the Austrian Institute of Economic Research (WIFO) described the current Austrian economy as “in a phase of stagnation”. This is expected to continue throughout 2023, despite positive expectations at the start of the year of significant economic improvement.
As a result, there is now a dichotomy across industries with the manufacturing sector already in recession, while market-related services are expanding. Additionally, tight global monetary policy is impacting the overall economic situation in Austria, along with ongoing high inflation.
Christian Glocker, an author of the current WIFO Economic Outlook, said: "While buoyant industrial economic activity still contributed to economic growth in 2022, industry will make a negative contribution to overall economic growth in 2023."
Unemployment is also expected to increase by 2.3 percent in 2023. But in 2024, WIFO economists predict a slight recovery with overall economic growth rising to 1.4 percent and a decrease in unemployment.
READ MORE: What is the best way to invest your money in Austria?
Inflation is finally going down
One positive economic development is that inflation in Austria is finally falling.
In June, the official rate of inflation was 8 percent – the lowest rate since May 2022 and a stark contrast to the high of 11.2 percent in January.
It’s not all good news though as WIFO economists say the projected slowdown in the economy will only have a minimal impact on prices, so inflation could remain high for a while longer.
According to a WIFO report: “The inflation rate according to the Harmonised Index of Consumer Prices (HICP) will initially fall only slightly to 7.4 percent in 2023 (+8.6 percent in 2022).
“In 2024, inflation will moderate significantly to 3.5 percent, but will remain buoyant compared to the long-term average.”
The reason for stubbornly high levels of inflation is mostly due to high energy prices, with an increase in wage costs also playing a part, reports ORF.
However, energy prices are set to fall by up to 40 percent in seven Austrian states – a move that is expected to save Austrian households hundreds of Euros, as reported by The Local.
In the meantime, Austria still has one of the highest levels of inflation in the Eurozone (average is 5.5 percent), while neighbouring Switzerland has already brought inflation down to less than 2 percent.
READ ALSO: How tenants in Austria can save money from July 2023
What about the property market?
The Austrian property market has boomed in recent years as buyers have sought more space and a “safe” investment for their money amid economic uncertainty. The result has been a steep rise in prices, especially in property hot spots like Vienna, Tyrol and Salzburg.
But according to real estate and rental agency Remax, prices are expected to fall this year as the overall number of homes sold decreases for the first time since 2013.
Bernhard Reikersdorfer, Managing Director of RE/MAX Austria, said: “The market has turned around year-on-year, demand has fallen significantly and supply has increased noticeably.
"The price curve already flattened significantly in the second half of 2022 and the prices in the fourth quarter for residential real estate have declined slightly compared to the previous quarter for the first time in many years.
“If the framework conditions on the market do not change, a trend towards falling prices can be expected in 2023. Investing in a condominium for personal use, but also as a form of investment and for pension provision, remains very interesting.”
However, it's worth noting that Remax recorded a 9 percent increase in apartment prices in 2022 (compared to 2021), and a 36 percent increase in a five-year comparison.
In 2022, prices were up by almost 80 percent compared to 2012, reflecting a decade-long trend of rising prices.
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