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What's driving the growth of the Real Estate Market in 2021

What's driving the growth of the Real Estate Market in 2021

The real estate market situation in Austria in 2021, how COVID-19 affected, what types of housing are in demand. What to expect by the end of 2021.

May 25, 2021

Austria is one of the most stable European countries. This applies not only to the national economy conditions, but also to the local real estate market. Despite the restrictive measures introduced due to the pandemic breakout, the work of Austrian real estate companies has been very productive since the second quarter of 2020. Foreign investors are showing active interest in local housing, but the structure of demand has undergone significant changes. Below we will share the potential expectations from the Austrian real estate market in 2021.

Market Situation in the Beginning of the Year

The main indicator of the Austrian real estate market activity is the house price index. It reflects the change in the market value of residential property over a given period. In the third quarter of 2020, this indicator reached 139.23 points. Such a high value of the price index is the result of the active work of the market and the steadily growing demand for local housing. According to Paul Gibbens, the real estate specialist at Housebuyers4u, current price trends place Austria among the most efficient real estate markets in the EU. Germany, Luxembourg, Sweden, Portugal, and Malta – all of these countries, as Austria, have noted an increase in the value of residential real estate. In such countries as Finland, Spain and France, the rise in prices occurred at a much slower pace.

Below are a few facts which make it possible to think about the development of the Austrian housing sector in 2021 in a positive way:

The country has an impressive stabilization fund of EUR 38B (approximately 10% of GDP), which helps to mitigate the negative effects of the pandemic.
As of the end of April 2020, about 29% of the workforce was in short-term work.
For the first three quarters of 2020, the growth in property prices amounted to 5%.
According to the results of the previous year, single-family houses were the most popular. The growth rate of their value was 13.8%.
Even with the widespread blockage and the actual freeze of the real estate market in early 2020, the total amount of real estate transactions decreased by only 13% compared to the previous year.
The share of international investors in Austrian residential property has risen to 45%.

Housing Types in Demand

The CEO of Marshal Real Estate, Peter Marshall, said that 2020 was a fruitful year for Austria, especially for properties with terraces and gardens. After forced self-isolation, many expats began to value open spaces more. Along with the traditionally popular small city apartments, the demand for apartments with balconies and open terraces has begun to grow.

Currently, not all investors are confident in the safety of their funds. For this reason, many expats tend to invest in the safest assets, in particular, residential real estate. The second half of the last year, despite all the restrictions and the pandemic, was very productive for real estate companies and the new 2021 also began in a positive way.

According to the marketing company Lindforth, a strong demand maintains in the Austrian Alps for ski assets – cottages and chalets. The real estate consultant, Maisie Delaney Baird, confirmed that ski property deals remained stable throughout the pandemic.

It should be noted, that the conditions of the pandemic had a strong impact on the technical aspects of the work of realtors. Due to travel bans in most countries, a majority of international buyers is prevented from traveling and inspecting properties of interest personally. Therefore, companies use video inspections, virtual tours and 3D visualization as a reasonable alternative.

Brief Overview of Popular Regions

In the report of the 2020 results, investments in residential real estate for the first time surpassed investments in the office building market. As stated by the annual report of the Bank of Austria, residential construction in the country was one of the fastest growing sectors.

Investment in Austrian housing is expected to remain consistently high. Thus, the supply will also tend to match the increasing demand. This means that in the foreseeable future, there will be significantly more new projects of real estate in the country. It applies to both budget and luxury buildings.

Speaking about luxury real estate in Austria, there is a high level of demand throughout Austria this year. Buyers are showing increased interest in homes in the Alps and lake regions.

For instance, Kitzbühel is the most popular among German buyers. It occurs largely due to its convenient location and relative proximity to Munich. The situation is similar in the lake areas of Carinthia and Salzburg.

Wealthy foreigners want to own real estate in picturesque yet conveniently located areas. If Vienna was in the highest demand before, now there are many adherents of provincial Austrian houses. When searching for residences, buyers try to consider not only the benefits and convenience, but also their lifestyle. During the pandemic and severe restrictions on social contacts, many specialists work remotely, and the opening of home offices for self-employed persons has become a common practice. Working in a cozy chalet is much more attractive than doing so in a city apartment.

We note that despite a significant reduction of the tourist flow, there is an interest in the investment property among expats.

What to Expect

The year of 2021 started on a positive note for the Austrian property market. But the way it will end remains an open question. The results of this year directly depend on the development of the pandemic and the introduction of additional restrictive measures.

Now the real estate market in Austria and the EU is quite stable. But it is important to consider the general economic situation. Most people's incomes have declined. Many citizens are losing their jobs due to the blocking of companies that do not have the financial ability to continue their work. This means that fewer people will be able to afford to purchase their own property, which will affect its further price. In fact, the crisis has not yet passed, and its negative impact may still manifest itself in the second half of 2021.

As claimed by Peter Marshall, the pandemic has changed the reasons why people buy real estate. While earlier wealthy foreigners sought to live in urban centers, then with the remote mode transition, many more buyers prefer scenic and cozy suburbs.

An important question is whether property prices in Austria will continue to rise. At the moment, the demand for local housing is very high, and the pricing increase due to the high interest of foreigners in Austrian housing is quite an expected forecast. Local property prices have been rising for many years, but in the current unstable environment, there is no certainty about this issue.

Conclusion

Even in a pandemic, the Austrian real estate market is characterized by a steadily growing demand from foreign investors. According to the results of 2020, the house price index increased to 139.23 points.
There is an increase in interest in suburban real estate with an abundance of free space, open terraces, gardens.
Along with Vienna, such regions as Salzburg, Carinthia and Kitzbühel gain high popularity among investors.
As for the forecast for the year 2021, it strongly depends on the pandemic situation in the world.

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