The Austrian real estate market is continuing to grow

The real estate market in Austria is registering relatively significant additions despite nine years of growth. On the other hand, the growth in prices has somewhat slowed down over the last year.

The index of real estate prices in Vienna increased by 13.09% (or 10.02% not including the influences of inflation) over the course of 2012. Only in the fourth quarter was there a small decline by approximately 0.65 %. Prices also increased in the other federal states, this concerning an average growth of 8.46% over 2012. This information comes from the Austrian National Bank.

Real estate prices in Vienna fluctuate around EUR 2,500 to 3,300 per square metre. Compared to this, in Kitzbühel, one of the most famous Tyrolean resorts, the cheapest apartments sell for amounts in the region of EUR 360,000 and prices of luxury chalets can reach as much as several million euros.

Prices of real estate in Vienna have been rising steadily since the third quarter of 2004. During the boom from 2003 until 2012, prices increased by 89.5%. Growth was not as stable in other regions of Austria and reached a value of only 31.8%. This is given to a certain extent by the lack of building plots in the capital and demand exceeding supply.

According to data from the Austrian Statistical Office, 9,689 new houses and residential units were awarded certificates of occupancy in the third quarter of 2012, which represents a year on year growth of 9.4%. Floor space in new items of real estate exceeded 2,900,000 square metres. However, compared to the period of 1996 to 2000, these are still relatively low values.

It can be expected that the market will continue to remain strong in 2013, although smaller fluctuations cannot be avoided. The experts allege that thanks to the steady high demand, prices of real estate will continue to increase. Why the real estate market in Vienna is so specific

The different situation in Vienna is caused among other things by the fact that the ownership structure of the real estate in the capital is different to that in the rest of Austria. Around 70% of real estate is owned by investors, banks and other commercial companies. With a view to the strong demand and limited offer, the growth in prices is relatively swift. It has been evident in recent times that prices of real estate in excess of 100 square metres will grow faster than prices of smaller real estate – this again being given by the limited offer.

Rental prices remain stable

Vienna has one of the highest shares of rentable real estate (77.8%), whereas in the rest of Austria, this share is somewhere around 58%. Increasing prices of real estate and what is basically a stable level of rental, thus lead to an interesting return on investment for real estate, but also to relatively low incomes from rental.

Supply exceeding demand in the 1990s led to a drop in rental prices. This came to a standstill in 2000 and a slight increase was seen in 2001. Rental levels have remained almost unchanged since 2002 and according to the latest analyses, it is not possible to expect any significant growth in the near future.

Vienna: smaller floor space = greater average income

Statistics show that from the point of view of income from rental, it pays rather to invest in smaller real estate outside the centre of Vienna. With a view to the high purchase prices of real estate in the very centre of the city, in some cases the income is somewhere around 1%. In other city districts, the income is higher, to be found somewhere around 2 to 5%.

On conversion of income to income per square metre, it is evident that in the case of real estate with an area of 50 square metres, the income is somewhere around 5%. In the case of medium-sized flats ranging from 85 to 120 square metres, income is somewhere around 3.6%. In the case of real estate with floor space of 175 square metres, incomes already drop to values around 2.6%.

Income from rental in Vienna

Compared to this, in the case of real estate in Austrian alpine resorts income from rental usually amounts to somewhere between 5 and 8%. In the case of recreational real estate intended for further rental, owners can also use their house or apartment for several weeks during the year for their own requirements and spend their holidays there.

Economic growth awaits Austria

According to the latest analysis by the Austrian Institute for Economic Research, it can be expected that the Austrian economy will grow over the next two years by 1, or 1.8 %. Despite the auspicious development of the situation (export and household consumption is on the increase), Austria too must deal with the problem of a deficit in public funding. Employment in Austria is the lowest in all countries of the European Union and despite partial problems, Austria has one of the most stable economic situations in the whole of Europe.

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