The cost of real estate in Austria in 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.

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.

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.

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.

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.