Austria: Overview

RENTAL YIELDS

Vienna apartment yields poor between 4.29% - 6%

Yields are not high, at 4.4% gross for a 120 sq. m. apartment, though newly-built central Vienna lofts and penthouses can command slightly higher gross yields (up to 6.5%).

The oversupply of rental units in the 1990s led to a fall in rents paid to private landlords. The sharp fall of rents stopped in 2000 and they even rose briefly until 2001, but fell once more in 2002. Rents are now rising again, especially in good locations and top-tier property.

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TAXES AND COSTS

Rental income tax is high in Austria

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	33.9%	25.6%	25.9%
Click here to see a worked example
Source: Disclaimer

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. Income tax rates at the relevant bands (€10,000+, €25,000+ and €51,000+) are at 38%, 43.6% and 50%, respectively.

Non-residents suffer special penalties, the tax base of each non-resident individual being notionally increased by €8,000 – see Baker & Tilly’s worked example, footnote 7.

However one convenient feature of the system is that those who fall under Austria’s lowest tax threshold are not required to submit accounts to the authorities.

Capital Gains: There is no liability to capital gains tax if the property is sold after 10 years. Otherwise, capital gains are taxed at ordinary income tax rates.

Inheritance: Inheritance tax rates are progressive from 2% to 60% depending on the value of the estate as well as the relationship of the donor and beneficiary.

Residents: For Austrian residents, world-wide income is subject to Austrian taxation.

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BUYING GUIDE

Buying costs are high in Austria

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.

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LANDLORD AND TENANT

Austria has a pro-tenant rental market law

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.

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ECONOMIC GROWTH

Economy strengthening

Austria has been enjoying stronger economic growth, with 3.3% GDP growth in 2006, after 2% growth in 2005, and 2.4% growth in 2004. Despite substantial immigration (66,000 in 2006), by some measures the unemployment rate has fallen significantly from 7.3% in 2005, to 5.1% today. One measure of increased optimism is stock market performance – since early 2003 the stock market has risen fivefold to its peak (though it recently fell back somewhat). Real wage growth was 2.48% in 2006, a healthy increase on 2005’s 1.61% real wage growth. Inflation has been subdued at 1.7%

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 again became a fully independent republic under the condition that it remained neutral. Thereafter Austria became active in international arena and increasingly involved in European affairs. It joined the European Union (EU) in 1955 and the Euro Monetary System in 1999.