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The cost of real estate in Austria in 2022

The latest Austrian real estate market data - property values, price analysis by property type, the Austrian rental market and the difference in local house prices, construction activity and housing lending in 2022.
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10 min
PUBLISHED 01.09.2022
Over the last couple of years, the real estate prices in Austria have soared amidst the COVID-19 pandemic and its historically low mortgage rates. In fact, according to the Property Index 2022 by Deloitte, Austria ranks as Europe's second costliest property market.
Nevertheless, with the average price per sq. m set at EUR 5,788, Vienna is still more affordable than other popular European cities, such as Paris (EUR 13,462) and Munich (EUR 10,500). In this article, we will take a look at the current trends in real estate prices 2022 in Austria, and the main factors that have had an impact on these fluctuations.

Real Estate Prices in Austria 2022

As stated by the latest Financial Stability Report by Austria's National Bank, during the first quarter of this year (2022), real estate prices grew by 12.3% compared to the same period last year (2021). The real estate price development remains the same in Vienna and the rest of Austria, while low-interest rates promote loan volume and attract investment opportunities within the real estate market.

It is worth noting that while property capital values increased much faster than household incomes for about 10 years, a high number of individuals took out mortgages which lead to the burst of the housing bubble.
This is due to the fact that the lending criteria is too lax and leaves little room for maneuver in case of any force majeure, such as unemployment, the growing cost of living or rising interest rates.
In order to prevent a crisis in the local real estate market, there were some changes made to mortgage procedures. From August 1st 2022, there is a mandatory deposit of 20%, while loan repayments cannot account for more than 40% of a purchaser's income. Also, mortgages can be granted for as long as 35 years and cannot exceed 90% of the calculated property value. At the same time, loans of up to EUR 50,000 will not be affected by the recent regulations, which will facilitate the financing of renovations, for instance.
NOTE! Austria also announced the change of its rental rules from 2023, eliminating the need for tenants to pay for brokerage fees and making it the responsibility of the landlord. According to the estimated figures of the Austrian government, the fees for rental brokerage amounts to a total of EUR 50M a year. Usually the amount of commission is equal to 2 months of the rental price.
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Analysis of Prices by Property Types in 2022

As revealed by figures from OesterreichischeNationalbank (OeNB), during the year to Q1 2022, the residential real estate price in Austria grew by a whopping 12.36%, making it the second highest y-o-y increase since Q2 2012. At the same time, Vienna witnessed a thumping 11.85% during the year to Q1 2022, and is one of the largest annual increases in recent history.
For new properties, the average cost grew by 14.61% during the year to Q1 2022, which is a significant increase from the slight growth of 3.11% in 2021. Existing dwellings in the meantime saw an average price increase of 13.3% in the first quarter, compared to the same period last year. In terms of existing houses, the average cost increased to 12.33% y-o-y which was on par with the previous year's 12.09% growth. For existing apartments, the average cost increased by 14.05% on an annual basis in the first quarter of 2022.

Overall, the OenB's fundamentals indicator for residential real estate prices in Austria increased sharply in Q1 2022. Such growth has not been witnessed since the start of the series in 1989, with the indicator for Vienna amounting to 40% in Q1 2022. These figures clearly illustrate that the Austrian residential property market may be on the edge of overheating.

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Construction Activity and Housing Loans in 2022

While last year (2021) the amount of handovers broke the records set in 2019 and 2020, from 2022 onward the number of completions is set to decrease. That being said, amidst the current rapid residential construction activity and declining population growth, the number of property completions across Austria will exceed demand by nearly 30,000 homes this year (2022). Taking into account the current real estate market developments, this will lead to a softened demand; taking into account this factor as well as a lack of construction materials and a prospective interest rate increase, the boom in construction will recede further.
As shown by OeNB, the increase of housing loans to households continued to advance slightly in the first months of the current year (2022), having reached 7.2% y-o-y in March 2022.
At 1.27%, the average interest rates on euro-denominated mortgages were 9 basis points higher in March 2022 on an annual basis. In May 2022, the total number of housing loans grew by 8.2% to EUR 139.04B compared to the year before, of which 95% were mortgages granted to Austrian households, while the remaining 5% were given to individuals in other Euro area member states.

However, the indicators still remained lower than those registered before the beginning of the COVID-19 pandemic. Housing loans to households continue to be at significant interest rate risk, with variable rate loans still accounting for over ⅓ of new mortgages.
NOTE! While the Austrian loan market has increased to 33.75% of GDP in 2021, up from 17.1% of GDP in 2003, as stated by the Global Property Guide, the country still stays under-mortgaged: the EU's average is 50% of GDP.

Rental Market in Austria 2022

In the first quarter of 2022, there were about 1.7 million leased dwellings in Austria in Q1 2022, which is a 0.9% increase from the identical period the previous year. That being said, as revealed by Statistics Austria, the average rental cost (excl. running costs) per dwelling grew by a modest 2.1% to EUR 421 per month. If calculated per sq. m, the increase in the average rent is slightly less, as it is set at 1.6% - EUR 6.3 over the same period.

Vienna has one of the largest percentages of renter households worldwide, with about 75% of homes rented. At the same time, in Austria, in general, 41.2% of residences are rented, while 56.4% are owned.

The high percentage of rented residential real estate is attributed to the big proportion of subsidized low-rent apartments in the rental market, alongside limited tax incentives for home ownership.

Difference in Local House Prices

Vienna has been ranked once again as the most liveable city in the world in the Global Liveability Index from the EIU, based on the social and economic conditions, health, education, housing and the environment. In fact, "availability of good-quality housing" accounted for 20% of the score.

In the upscale residential market, Austians represent approximately 60% of real estate buyers while the remaining 40% are foreigners; predominantly from Eastern European countries like Ukraine and Russia. At the same time, the super-luxury areas in Vienna are in high demand among individuals from Hong Kong, the Middle East, the United States and Switzerland.
The First District, also called Innere Stadt, is the center of Vienna's secondary and luxury property market. In June 2022, apartments here were priced at about EUR 21,773 per sq. m on average, which is a 30.7% increase compared to the year earlier.
In specific cases, the cost reaches EUR 30,000, while slightly lower prices are recorded in surrounding areas, such as the 2nd to 9th districts. In the 19th, 18th and 13th districts, prices of villas or condos vary between EUR 7,600 and EUR 10,000.

In comparison, houses in Graz were priced at EUR 3,890 per sq. m in June 2022. Linz and Salzburg offer comfortable homes for EUR 8,223 and EUR 8,899 per sq. m respectively.

How Can We Help?

If you are considering an investment in Austrian property for living or income, or if you are looking for a residential/commercial property to rent, or if you want to sell your property, our highly qualified team of real estate agents at Luxury Immobilien GmbH are ready to help you in everything that concerns buying/selling and renting in every Austrian province.

We will handle the entire transaction from A to Z, informing you beforehand of the current trends and upcoming real estate market forecasts to help you benefit from the purchase, as well as provide legal advice. If you are interested in taking out a loan, we will help you to collect the necessary documents and present your case to the representatives of the respective bank or financial institution in the most beneficial way to reduce the risk of any refusal.
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