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Top 5 benefits of buying an income house in Vienna
What is a revenue house, profitability of purchase, location around Vienna. How to buy a small hotel in the Austrian capital, projected profitability.
In 2020, the population of Vienna exceeded 1.9 million people. Compared to the previous year, the increase was 0.78%. The housing stock of Vienna consists of more than 1 million apartments. The major part of them - about 630 000 - is occupied by tenants. These figures correspond to almost half of all rented houses in Austria. Of course, with the growth of the city's population, the demand for rental houses also increases.
It is not a coincidence that rental houses and apartments for rent is a large and dynamically developing market. In Vienna, there are about 15 000 classic rental houses. This is about 90% of all rental houses in Austria. Annually, there are approximately 500 - 600 transactions for the purchase of rental houses made in the capital's rental market.
Location of the rental houses in urban areas
Vienna has 23 districts, but not all of them have the same number of rental houses. For instance, there are more than 1 300 buildings in the 16th district, 1 060 - in the 3d district and 1 020 - in the 18th district. On the contrary, in the 23rd district there are only 92 houses, in the 11th - 120.
Turnover of the rental house market and the number of transactions
The market for rental houses is in constant motion. According to various expert estimates, the annual volume of transactions with these property units ranges from €700 million to €1.4 billion. For example, according to EHL, the most "productive" year recently was 2012. That time, the total volume of transactions (meaning contracts for the purchase and sale of an object in whole or in part) counted to almost €1.4 billion. Despite the economic crisis in 2008, this amount exceeded €780 million. In 2009 - 2011, the annual turnover of this segment of the real estate market significantly increased and varied from €1.2 to 1.3 billion. In 2013, it fell to €1.05 billion. However, in 2016, the market volume reached the level of €1.3 billion again. Although, nowadays the analysts report about the stabilization of the real estate market.
Experts attribute it to several factors:
The annual decrease in the number of rental houses in Vienna by about 1%
This is connected with the demolition of old buildings. Instead, there are new buildings constructed. Moreover, there are some buildings reconstructed or repurposed. Take into consideration the sale of apartments after major repairs, the transition of buildings from the category of a rental house to housing partnership.
The price growth
The rates for such objects have grown significantly in recent years. Thus, the relatively cheap objects (worth up to €1-2 million) have almost disappeared. The rental houses in central areas, located near parks or shopping centers, are in high demand. However, there are not so many buildings left.
Lack of property for sale on the market
Few properties are put on the market for sale. Furthermore, a significant part of the owners is in no hurry to sell them at all. The owners tend to believe that in a period of economic crises and an unstable euro, the best investment is profitable real estate in Vienna.
In which areas of Vienna is it possible to buy rental houses?
The analysis of transactions in 2010-2015 reveals a picture of the distribution of investor activity in Vienna districts. The smallest number of purchase and sale transactions with rental houses is made in the 1st District. Over the past year, there have been less than 20 rental houses sold. It is not a surprise: an average transaction price in this area usually exceeds €10-15 million.
The 16th and 17th districts have attracted the highest number of buyers in recent years. For example, in 2010-2013, approximately 200 rental houses were sold annually in these districts. Analysts explained such a rapid investment activity by several circumstances. First of all, there are three times more rental houses than in the city centre, and they were not very expensive.
Secondly, an average transaction price in those years did not exceed €600,000 - 800,000. In the following years, the number of transactions began to decline, and their value almost doubled.
A few years ago, there were also active transactions with rental houses in the areas between Ring and Gürtel streets. More than 100 purchase and sale agreements were signed annually, which accounted for about a quarter of the total number of such transactions. However, the share of these sales was almost 44% (more than €500 - 600 million). In 2014-2016, the 5th, the 6th and the 7th districts hosted several major transactions with a total value of more than €100 million. But the number of such contracts subsequently began to decrease as well.
Why do you need to buy apartment buildings in Vienna?
Firstly, the Austrians themselves consider the purchase of real estate, and, in particular, the rental houses, a very reliable investment. It doesn't matter what happens with the currency, gold or oil. No matter what happens to the exchange rate of currency, gold or oil. The real estate in Vienna remains the "safe haven" that never falls in price. The purchase of a property unit is the protection and preservation of capital.
Secondly, the rental houses are called so because they bring their owners rental income. The Austrians themselves report that the profit is lower than the one from a retail centre or resort real estate. However, buying a rental house is a long-term investment that is measured in decades. Of course, such objects are purchased with the involvement of a bank loan. With a rental yield of 3-5% and an annual capitalization growth of 4-7%, it turns out that the income for several years can already be measured in many tens of percent.
Thirdly, according to all forecasts of sociologists and city authorities, the population in Vienna in the next 5 years will exceed 2.1 million people. All new citizens need housing. There are not many places left for large-scale housing construction in the city. It means that the demand for housing, including rental housing, will increase. Along with this demand, both the cost of square meters and rental rates will increase as well.
Fourthly, you can make a good profit even on the rental housing's potential. According to successful developers, there is always a profit scheme. When they buy a house with a total area of 1000 square metres for €2 - 2.5 million, they expect to sell half of the apartments after their restoration and rehabilitation of the house itself at a price of €5,000 - 6,000 per square meter. Thus, they will return the initial investment. Remember, that there is a second half of the apartments left. Later they may rent them, and gain even more profit.
Fifthly, you can increase the number of apartments. In a rental house, you can add an upper attic floor and build several penthouses there. These property units can be sold more expensive than apartments on the lower floors. Even after paying all the necessary taxes, the amount of this profit can be quite significant and, likely, will justify the investment in the project.
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