Aug 25th 2023 Development of real estate prices in Austria 2023

The real estate price index of the Austrian Federal Economic Chamber (WKO) offers current price data that provides a detailed breakdown for different cities. However, it is important to note one particular nuance: the year given simply refers to the year of publication of the report. The data presented represent the average value of the previous year. In order to recognize the trend over the course of 2022, the residential property price index developed by Professor Feilmayr from the Technical University of Vienna and published by the Oesterreichische Nationalbank (OeNB) offers a helpful perspective. While there was an increase in property prices, influenced by investors' flight to real values ​​and simultaneous anticipatory effects of debt-financed property purchases ahead of the tightening of housing lending standards in Austria, this increase accelerated over the course of 2022. The annualized increase rose from 12 .3% in the first quarter to 13.1% in the second quarter, then peaked in the third quarter of 2022 in terms of prices.

Real estate price developments in 2022 and 2023

In the period from the fourth quarter of 2020 to the third quarter of 2022, average residential property prices in Austria recorded a double-digit increase. However, this momentum slowed nationwide in the third and fourth quarters of 2022, with house prices rising by 10.8% and 5.2%, respectively. The overall index for Austria fell from a peak of 278.3 points in the third quarter to 271.8 points in the first quarter of 2023, a decrease of 2.3%. The previous boom in single-family homes outside of Vienna came to an abrupt end. A decline of 3.2% was recorded between the third quarter of 2022 (index level: 237.1) and the first quarter of 2023 (index level: 229.6). Year-on-year growth shrank from 12.5% ​​in the third quarter of 2022 to -1.0% in the first quarter of 2023. There were noticeable differences in performance between new and used apartments. In Vienna, for example, in the first quarter of 2023 an increase of around 5.1% in new apartments was offset by a decrease of 1.3% in used apartments.

The single-family house boom also came to an end in Vienna. After an increase of 16.3% in the third quarter of 2022, the first quarter of 2023 already recorded a decline of 1.7% year-on-year. Due to the rise in interest rates in the current year, investment apartments with rental yields of less than 2.5% have become less attractive. Especially when stagnation or even a temporary drop in real estate prices is foreseeable. That's because investors are now in competition with long-dated Bunds, which offer yields in excess of 3%. At the same time, demand from loan-financed buyers fell by 62% in the course of the first quarter of 2023 (according to new lending of housing loans to private households in Austria compared to the previous year). An additional factor is the ESG concept (environment, social affairs and corporate governance). Buildings with an environmentally friendly orientation are increasingly maintaining their price stability, while properties with poor energy efficiency values ​​may already anticipate future renovation costs in their value development. This results from the tightening legal requirements for energy renovation.

The following price information from the various federal states offers a comprehensive overview of the price development of single-family houses, first-time occupancy condominiums and rental apartments that are not subject to the rental caps. This data comes from the real estate price index 2023 of the Austrian Federal Economic Chamber (WKO) and takes into account the data for residential areas with normal or average residential value.

Outlook on real estate prices in Austria for 2023/24

The previous developments, including the already recognizable trend towards a divided real estate market (according to climate friendliness and energy efficiency), are expected to continue in the course of 2023 and at least in the first quarter of 2024. In rural areas in particular, this should lead to a downward trend in prices. This outlook is consistent with the opinion of experts: According to the RE/MAX Real Estate Future Index, which is based on a combination of around 600 real estate expert opinions across Austria, apartments in central locations are expected to lose 5.4% in value in 2023. The strongest impact is expected to be on condominiums in rural communities, which are projected to fall in value by -7.2%. Detached houses in residential areas are expected to lose 6.2% in value. In contrast, a slight increase of 0.4% is expected for building plots, as forecast by the experts.

^{Source: https://www.infina.at/ratgeber/immobilienpreise-in-oesterreich}