Mar 1st 2024
Hausbau 2024 in Österreich
At just under 55 per cent, the home ownership rate in Austria is significantly higher than in the other two DACH countries. This means that more people in this country are able to afford their own home compared to our German-speaking neighbours. Nevertheless, the proportion of people who rent is also increasing here year on year. This is not least due to rising prices. In this blog, we explain how house building costs will develop in Austria in 2024. Construction costs in Austria in 2024 have decoupled from building prices and reached a rare high.
Statistics Austria regularly provides data on this topic, including the construction cost index and the construction price index.
The construction cost index shows how much contractors pay for materials and labour, while the construction price index shows what clients ultimately pay. The difference between the two represents the construction companies' profit. Over the last ten years, these indices have generally risen in parallel. However, a change has taken place since May 2022: Construction prices rose faster than construction costs, resulting in higher profit margins for construction companies.
Before 2022, the annual rate of increase for both indices was generally around 2 to 3 per cent. However, 2021 brought huge increases: construction costs rose by 22.4 per cent and construction prices by 20.3 per cent. For around a year now, however, construction costs have been falling slightly, while construction prices have continued to rise.
Higher interest rates and declining construction activity
Construction activity in Austria fell sharply last year. In addition to the actual construction costs, high financing costs are primarily responsible for this. In order to counteract rising inflation, the European Central Bank (ECB) has regularly decided to increase the key interest rate in recent years. This makes it more expensive for banks to borrow from the ECB. If borrowing becomes more expensive for banks, this also has an impact on private individuals and companies.
This increases the cost of construction on top of the already rising construction costs, which discourages profit-orientated project developers as well as private and public builders. The impact on the Austrian housing market could be severe if more is not built soon, particularly in urban regions.
Whether this will already be the case in 2024 remains questionable. Many experts even assume that construction activity in Austria will continue to decline this year.
Translated with DeepL.com (free version)
Various reasons for price increases in house building in Austria
The cost of building materials such as wood has risen significantly in Austria, which means that builders have to pay much higher prices. However, it is not only timber that has become more expensive; glass and insulation materials have also seen price increases. Although supply chains are largely functioning again and inflation has eased somewhat in Europe, many building materials are still significantly more expensive than before the pandemic. However, this is not the only reason for the high house building costs in 2024. High energy costs, government fees and the shortage of skilled labour also play a role.
Rising energy costs
Energy prices have risen significantly in the European Union, and Austria has not been spared the high prices for electricity, oil, gas, etc. This affects construction costs in several ways. This has multiple effects on construction costs. The rise in energy costs makes building more expensive. Construction activities require energy, be it for the operation of lorries, excavators and other vehicles, for the use of construction machinery or for the electricity required for lighting and hand tools, which is either drawn from the power grid or generated by generators. At first, these costs may seem low. However, when you consider that energy consumption already accounted for around 6 per cent of total construction costs before the pandemic, this perspective changes. Even minor changes can increase construction costs by four or five-digit amounts.
The high energy costs also have an indirect impact on construction costs, particularly for building materials. Production costs increase considerably due to the high energy costs.
Plastic components, which require a lot of energy to produce and are also made from crude oil, the price of which has also risen, are particularly affected. In addition, transport costs are increasing due to high energy prices, which makes the cost of building materials and therefore the entire construction process even more expensive.
State fees
Government fees such as levies and taxes also influence construction costs. In addition, building regulations have become increasingly strict in recent decades, which increases the administrative and operating costs for construction companies.
Shortage of skilled labour
Due to the shortage of skilled labour in Austria, wages are rising as construction companies have to pay more to recruit and retain qualified staff. These wage increases are reflected in the overall costs of construction projects. However, it's not just about wages. A shortage of skilled labour can also lead to longer project durations. Time is money in the construction industry, and delays increase costs by tying up resources and machinery for longer. In addition, the shortage of skilled labour affects the quality of work. Less experienced or less qualified labour can lead to mistakes, which in turn require rework - and that means additional costs.
Build or wait until 2024 in Austria?
For private builders in Austria, the question arises as to whether it is worth building in 2024 or whether it is better to wait. The answer to this question depends on individual factors.
Although construction and energy costs had stabilised somewhat by January 2024, they are still at a high level. However, speculation about further price falls should be viewed with caution. In the long term, prices for residential property in Austria are likely to rise.
There is no universal answer as to whether one should build now. For those who have the financial means to build a house, it may be worthwhile not to wait any longer. However, no one can give a guarantee.
One consideration for waiting could be that the current economic situation is uncertain. It is possible that prices for building land and building materials will fall in the future, which would make building cheaper. Also, in the meantime, more time could be spent planning and saving finances to better manage construction costs.
Summary of house building costs in Austria for 2024
In 2024, prospective homeowners in Austria face a number of challenges, but also opportunities. The home ownership rate of just under 55 per cent is impressive, and many people are able to fulfil their dream of owning their own home.
Nevertheless, rental prices are also rising here every year, which is partly due to the high cost of building a house. One reason for the high costs is the decoupling of construction prices from the construction cost index in Austria. After years of parallel development of the construction cost and construction price indices, a separation has been observed since May 2022. This means that construction prices are rising faster than costs, resulting in higher profit margins for construction companies. Another reason for the decline in construction activity in Austria is the high cost of financing. The increase in the key interest rate by the European Central Bank to combat inflation is making loans more expensive, which is deterring both commercial and private builders.
Nevertheless, there are ways to reduce house building costs. Various strategies can be used, such as not building a basement, fixed price agreements, building with a kit or prefabricated house and doing it yourself. Digital tools such as PlanRadar can also help to optimise processes and reduce costs.
Sources: https://www.planradar.com/at/hausbaukosten/