House prices in Austria are continuing to rise rapidly, fuelled by strong economic growth and declining mortgage interest rates.
The residential real estate price index for Vienna rose by 9.52% (6.45% in real terms) y-o-y to Q1 2011, according to the National Bank of Austria (OeNB). On a quarterly basis, house prices in Vienna are up by 2.53%.
Property prices in the rest of Austria are also rising, albeit at a slower rate. The house price index for the rest of Austria rose by 2.36% during the year to end-Q1 2011. House prices grew by 2.52% q-o-q in Q1 2011, after a 1.4% rise in Q4 and a 0.9% drop in Q3 2010. Property price changes in the rest of Austria have been erratic ever since the index was assembled in 2000.
On the other hand, house prices in Vienna have been rising consistently since Q3 2004.
The divergence between the capital and the rest of Austria may be partly because it is difficult to build in the centre of Vienna.
House prices in Austria are expected to continue rising during 2012, due to the increasing demand for safe tangible assets due to the initial inflation surge, according to Bank Austria Real Invest. In September 2011, the country’s inflation rate was 3.6%, up from 1.7% in 2010 and 0.4% in 2009.
Mortgage interest rates are generally low, which induces more demand for housing units. In August 2011, the average mortgage interest rate for loans with an initial rate fixation (IRF) of 1 to 5 years was 2.45%, down from 3.7% two years ago, according to the Austria Central Bank (ONeB). Likewise, the average mortgage rate for loans with an IRF of more than 10 years was also down to 4.87%, from 5.12% two years ago.
Although the global crisis caused a sharp decline on mortgage loans in 2009, Austrian strong subsidized housing sector helped stabilize residential construction activity. Furthermore, the action of the Austrian government by end-2009 to soften the lending criteria led to an increase in new mortgage funding for 2010 and 2011.
The residential real estate price index for Vienna rose by 9.52% (6.45% in real terms) y-o-y to Q1 2011, according to the National Bank of Austria (OeNB). On a quarterly basis, house prices in Vienna are up by 2.53%.
Property prices in the rest of Austria are also rising, albeit at a slower rate. The house price index for the rest of Austria rose by 2.36% during the year to end-Q1 2011. House prices grew by 2.52% q-o-q in Q1 2011, after a 1.4% rise in Q4 and a 0.9% drop in Q3 2010. Property price changes in the rest of Austria have been erratic ever since the index was assembled in 2000.
On the other hand, house prices in Vienna have been rising consistently since Q3 2004.
The divergence between the capital and the rest of Austria may be partly because it is difficult to build in the centre of Vienna.
House prices in Austria are expected to continue rising during 2012, due to the increasing demand for safe tangible assets due to the initial inflation surge, according to Bank Austria Real Invest. In September 2011, the country’s inflation rate was 3.6%, up from 1.7% in 2010 and 0.4% in 2009.
Mortgage interest rates are generally low, which induces more demand for housing units. In August 2011, the average mortgage interest rate for loans with an initial rate fixation (IRF) of 1 to 5 years was 2.45%, down from 3.7% two years ago, according to the Austria Central Bank (ONeB). Likewise, the average mortgage rate for loans with an IRF of more than 10 years was also down to 4.87%, from 5.12% two years ago.Although the global crisis caused a sharp decline on mortgage loans in 2009, Austrian strong subsidized housing sector helped stabilize residential construction activity. Furthermore, the action of the Austrian government by end-2009 to soften the lending criteria led to an increase in new mortgage funding for 2010 and 2011.
Analysis of Austria Residential Property Market »
RENTAL YIELDS
Last Updated: Aug 29, 2011
Prices have been rising in Austria, particularly in Vienna and in Salzburg, which has seen significant price increases since two years ago (when we did our last survey). Prices in central Vienna are now typically around 4,300 Euros per square metre (sq. m.) (more for larger apartments).
Prices in Salzburg are nearer 3,000 Euros per sq. m. Graz is less expensive at around 1,900 Euros per sq. m.
Yields have not appreciably changed over this 2-year period, and remain at around 4.5% in Vienna – more for smaller apartments, less for larger. In Salzburg, gross rental yields are typically around 5%. In Graz, yields are higher, at over 6%.
We remind readers that these property yields are gross rental yields, i.e., they are calculated on the basis of the offered rent on the property, and are before vacancies, costs, repairs, refurbishments or any other expenses. Actually achieved yields are likely to be lower.
Prices in Salzburg are nearer 3,000 Euros per sq. m. Graz is less expensive at around 1,900 Euros per sq. m.
Yields have not appreciably changed over this 2-year period, and remain at around 4.5% in Vienna – more for smaller apartments, less for larger. In Salzburg, gross rental yields are typically around 5%. In Graz, yields are higher, at over 6%.
We remind readers that these property yields are gross rental yields, i.e., they are calculated on the basis of the offered rent on the property, and are before vacancies, costs, repairs, refurbishments or any other expenses. Actually achieved yields are likely to be lower.
TAXES AND COSTS
Last Updated: Sep 09, 2011
Rental Income: Tax rates in Austria are highly progressive, so that owners of larger properties are likely to have to pay heavily, though deductions are available.
Nonresidents suffer special penalties, the tax base of each nonresident individual being notionally increased by €8,000 – see Baker & Tilly’s worked example, footnote 7.
Capital Gains: There is no liability to capital gains tax if the property is sold after 10 years. Otherwise, capital gains are taxed at progressive income tax rates.
Inheritance: Inheritance tax is abolished effective 01 August 2008 and will be replaced by an ‘information duty’ to authority or ‘gift reporting tax’.
Residents: For Austrian residents, worldwide income is subject to Austrian taxation.
Nonresidents suffer special penalties, the tax base of each nonresident individual being notionally increased by €8,000 – see Baker & Tilly’s worked example, footnote 7.
Capital Gains: There is no liability to capital gains tax if the property is sold after 10 years. Otherwise, capital gains are taxed at progressive income tax rates.
Inheritance: Inheritance tax is abolished effective 01 August 2008 and will be replaced by an ‘information duty’ to authority or ‘gift reporting tax’.
Residents: For Austrian residents, worldwide income is subject to Austrian taxation.
BUYING GUIDE
Last Updated: Jul 09, 2007
Total roundtrip transaction costs are high at between 13.5% and 16.7% of the price. Bear in mind that Austrian lawyers charge on a per hour basis, at rates fixed by the lawyers’ association, so that a lawyer’s costs may be proportionately higher for small apartments. It takes about 32 days to complete the three procedures needed to register a property.
LANDLORD AND TENANT
Last Updated: May 29, 2006
Austrian law is tenant-friendly, with rent control at somewhat below free-market levels.
Rent Appeals: Tenants can appeal to a rent tribunal even after they have left the apartment, and reclaim rent ‘overpaid’. However with new rentals, the difference between what the rent tribunal would assess and free market prices is very small.
Tenancy Laws: The two sources of tenancy laws are the “ABGB” (General Civil Code) and the “MRG” (MietrechtsG, TenStatute), of 1982, as frequently amended. It is sometimes difficult to know whether both laws simultaneously apply (flats are covered by the much more restrictive MRG).
“The frequent amendments and its complex regulations…make the MRG and the regulations connected to it rather a “dark” discipline which is normally only overseen by lawyers specialized in the field of tenancy law,” notes the EIU Tenancy Law Project Austria survey.
Rent Appeals: Tenants can appeal to a rent tribunal even after they have left the apartment, and reclaim rent ‘overpaid’. However with new rentals, the difference between what the rent tribunal would assess and free market prices is very small.Tenancy Laws: The two sources of tenancy laws are the “ABGB” (General Civil Code) and the “MRG” (MietrechtsG, TenStatute), of 1982, as frequently amended. It is sometimes difficult to know whether both laws simultaneously apply (flats are covered by the much more restrictive MRG).
“The frequent amendments and its complex regulations…make the MRG and the regulations connected to it rather a “dark” discipline which is normally only overseen by lawyers specialized in the field of tenancy law,” notes the EIU Tenancy Law Project Austria survey.
ECONOMIC GROWTH
Last Updated: Oct 28, 2011
Austrian economy to grow a healthy 2.9% in 2011
The Austrian economy is expected to slow in the second half of 2011, due to weak domestic demand and uncertainty caused by the European debt crisis. However, the economy is projected to have grown by 2.9% in 2011, thanks to strong growth in the first half, according to the Austrian National Bank (OeNB).
Austria experienced relatively strong economic growth from 2004 to 2007 (average annual growth of 2.96%). After contracting by 3.9% in 2009, the economy emerged from recession with a real GDP growth rate of 2% in 2010.
The prime driver of the Austrian economy is exports to its main trading partner, Germany. More than 75% of Austria’s exports go to Europe, 30% to Germany. The value of exports increased 16.5% to €109.2 billion in 2010, according to Statistical Board Statistik Austria.
In September 2011, the country’s inflation rate was 3.6%, according to Austrian National Bank (OeNB), a significant increase from 1.7% in 2010, and 0.4% in 2009.
Austria’s budget deficit is expected to fall to 3.6% of GDP by end-2011, and to 3.2% of GDP in 2012, down from 4.6% of GDP in 2010. The country’s total debt stood at 72.3% of GDP in 2010, based on a data released by Statistik Austria.
Austria’s unemployment stood at just 4.4% in 2010, second lowest among all the 27 European Union (EU) members. Unemployment is expected to fall further to 4.2% in 2011, and to 4% in 2012.
Austria was annexed by Germany during the Second World War amongst popular acclaim. After the defeat of the Axis Powers, the Allies occupied Austria at the end of World War II until 1955. The country then became a fully independent republic again under the condition that it would remain neutral. Austria joined the European Union (EU) in 1955 and the Euro Monetary System in 1999.
Austria experienced relatively strong economic growth from 2004 to 2007 (average annual growth of 2.96%). After contracting by 3.9% in 2009, the economy emerged from recession with a real GDP growth rate of 2% in 2010.
The prime driver of the Austrian economy is exports to its main trading partner, Germany. More than 75% of Austria’s exports go to Europe, 30% to Germany. The value of exports increased 16.5% to €109.2 billion in 2010, according to Statistical Board Statistik Austria.
In September 2011, the country’s inflation rate was 3.6%, according to Austrian National Bank (OeNB), a significant increase from 1.7% in 2010, and 0.4% in 2009.
Austria’s budget deficit is expected to fall to 3.6% of GDP by end-2011, and to 3.2% of GDP in 2012, down from 4.6% of GDP in 2010. The country’s total debt stood at 72.3% of GDP in 2010, based on a data released by Statistik Austria.
Austria’s unemployment stood at just 4.4% in 2010, second lowest among all the 27 European Union (EU) members. Unemployment is expected to fall further to 4.2% in 2011, and to 4% in 2012.
Austria was annexed by Germany during the Second World War amongst popular acclaim. After the defeat of the Axis Powers, the Allies occupied Austria at the end of World War II until 1955. The country then became a fully independent republic again under the condition that it would remain neutral. Austria joined the European Union (EU) in 1955 and the Euro Monetary System in 1999.
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