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As we are nearing the end of 2021, Austria has witnessed yet another national lockdown, and many businesses have closed, however, the real estate sector has been thriving.
In fact, this sector registered a whopping price growth of 10.2% year-on-year in September 2021, according to the data by the CEIC.
The ongoing real estate boom is being fuelled by low-interest rates and high competition. These factors could mean that 2022 will also be a successful year for the Austrian property market, however, there is a chance that prices will start stabilizing over the course of the next 12 months. We have decided to review the performance and trends of the real estate sector this year, as well as predict the tendencies, supply and prices in 2022.
Overview of Austrian Real Estate Market in 2021
According to Oesterreichische Nationalbank (OeNB), in Q1 2021, Austrian residential real estate prices rose at the fastest rate in 9 years, as the property sector continues to recover from the impact of the COVID-19 pandemic. In fact, the country registered a price surge of 12.3% through March Y-o-Y, with prices in Vienna rising to 10.9%, while the remaining provinces together had an increase of 14% Q-o-Q. The price boost was mainly driven by new and used condominiums and single-family homes, similar to the year 2020. Meanwhile, the second quarter of 2021 witnessed a price growth of 10.7% in Vienna and 12.8% in other provinces Y-o-Y. Thus, for the country as a whole, the price increase reached 11.7 in Q2, continuing the uptrend for the fifth consecutive quarter. The value of the Austrian real estate market continued rising in Q3 2021 as well, with an indicator of 10.2% in Vienna and 10.6% in other provinces Y-o-Y.
As well as all the above, in H1 2021, the Austrian real estate market proved its resilience by recording EUR 680M and 1B worth of transactions in the first and the second quarters respectively, as reported by EHL. Meanwhile, the report by RE/MAX (RE/MAX ImmoSpiegel: Entwicklung Immobilienpreise im 1. Halbjahr 2021) states that Austria registered about 77,000 property deals during the first half of the year, which is an increase of 14% Y-o-Y. It is worth noting that residential properties accounted for 37% of deals in H1 2021, so it remains the preferred asset class. Meanwhile, from January to September, a total of EUR 2.6B was invested in Austrian real estate, which is 7% more than the same period last year.
From measuring the changes in residential real estate prices, the House Price Index (HPI) in Austria rose from 142.85 in January 2021 to 150.77 in July 2021, setting the highest ever recorded level of all time. The largest drivers of growth were in Lower Austria (+2,421), Vienna (+1,828), Upper Austria (+1,324) and Carinthia (+1,220). At the same time, Salzburg and Styria had the lowest growth indicators. As stated by the OeNB, the more pronounced price growths since the start of the pandemic are provoked by the lockdown measures and the increased use of working from home. Moreover, an increasing number of people tend tochoose real estate for investmentor for pension funds to bring in a stable income for the future.
According to the study by the consulting firm Deloitte, new apartments in Austria are the most expensive in Europe, with an average square meter price of EUR 4,457. This means that an apartment with an area of 70 sq. m costs an average of 10.6 times the national annual salary. However, this is still not the highest indicator in Europe, as Serbia and Austria the cost of property is 15 and 12.2 times the gross national salary accordingly.
In H1 2021, Vienna witnessed the highest number of apartment transactions – a total of 7,832 deals worth EUR 2.36B. Following its lead, there is Tyrol with EUR 925M with 2,904 apartments purchased. Meanwhile, Upper Austria ranked third, having registered 3,629 deals worth EUR 781M. Speaking of Tyrol, its property prices are some of the highest in the country, since it is located in the Alps and appeals to many potential second-home owners. In particular, wealthy buyers, as well as those who are willing to work remotely tend to invest in a home surrounded by the mountains.
In the table below, you can get an overview of the property prices in Vienna and the provinces from the official Land register, as of H1 2021.
As reported by the Wiener Zeitung, the Austrian building boom continues, with 7.0 active building permits for every 1,000 residents. According to the study by WKO, GBV and EXPOREAL, there are about 17,400 residential properties that will be completed this year. It is worth noting that there is an ongoing trend for compact apartments in Vienna due to the price increase.
The demand exceeds the supply, although 1 and 2-bedroom properties make up for 60% of residential units on average in developments.
As for rentals, Austria remains affordable due to its comprehensive tenancy law and subsidized housing, among other factors. On average, the price-per-square-meter of an apartment in Vienna amounts to EUR 8.65 in 2021, rising only by 1.6%. Thus, the average cost for a 70 sq. m apartment is EUR 944. Meanwhile, in other European capitals such as London and Oslo, tenants have to pay over EUR 20 per sq. m.
Note: During the first wave of the pandemic, Austria has also proven its stability and resilience by reacting promptly to the crisis. Despite the fact that for a good half of 2020 the property market had just stopped, by summertime it quickly returned back to the pre-pandemic level. It is worth mentioning that low-interest rates and the ability to meet the demands of investors are just a few of the key factors contributing to the speedy recovery of Austria.
Office Rental Market and Hotel Investments
The office rental market in Vienna is on a steady course of recovery as of Q3, since it increased by a whopping 92% when compared to Q2 2021. Although this is still 67% less than in the second quarter of last year, it still confirms the fact that the demand for office spaces in Austria is coming back.
As stated by Christie & Co, Austria recorded a total of EUR 110M in the hotel investment market in H1 2021, showing ongoing interest of real estate investors and the revival of tourism in the country. Among the notable transactions were the sales of the Sporthotel Ontana in Fieberbrunn, the Wombats The Lounge in Vienna and Hotel Alpinpark in Innsbruck.
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Forecasts for 2022
The OECD predicts a successful Austrian recovery with a projected rate growth of 4.2% in 2022. As stated by Justin Field, Marketing Director at property consultants Amazing Austria, the movement of individuals because of the pandemic provoked a boost in demand for properties in the provinces, enabling people to work remotely from home. Since the situation with the virus is unstable, the Austrian market is expected to witness increased interest in large family homes in villages. In 2021, property buyers worldwide have been looking for more functional residences with a balcony/terrace and gardens, as well as extra space for work, and Austria is not an exception. The year of 2022 is predicted to witness similar trends.
As well as the above, for the last 2 years, premium properties in the Alps and lake regions, such asJagdhotel, have been attracting many international and local buyers. According to Maizie Delaney Baird, Property Consultant at Lindforth, this is a sellers’ market at the moment, combining a shortage of supply and high demand. This trend is also expected to continue in the upcoming year, as buyers keep looking for more privacy, space and scenery than before. These properties can also be rented out and generate good income.
According to Raiffeisen Research, there is expected to be a solid price growth overall for 2022, at least in the mid-single-digit range, however, the strong performance of Vienna in Q3 2021 is not likely to become the start of an ongoing trend. Meanwhile, Justin Field predicts that the real estate market will level out or even reduce in the year to come because of the uncertainty of the COVID-19 situation. In terms of supply, the highest number of developments than ever before is scheduled for completion, with an estimated 19,700 units in Vienna and 7,400 units in Lower Austria, besides other regions, according to WKO.
Amidst the rapidly increasing prices, the Oesterreichische National Bank was prompted to warn off possible overheating of the real estate market. In fact, across Austria, the property value has doubled since 2010, while the EU witnessed an increase of just one-third during the same period of time. Thus, there are concerns regarding the surge in mortgage rates, which exceed the average in Europe. As of November 2021, the volume of housing loans in Austria rose by 6.8% since September 2020.
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