Austria: Overview

RENTAL YIELDS

Last Updated: Feb 13, 2006

Vienna apartment yields moderate
between 4.29% - 6%; Salzburg and Graz weaker

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

Last Updated: Jul 14, 2008

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 is abolished effective 01 August 2008 and will be replaced by an ‘information duty’ to authority or ‘gift reporting tax’.

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

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BUYING GUIDE

Last Updated: Jul 09, 2007

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

Last Updated: May 29, 2006

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

Last Updated: Mar 02, 2009

Anemic economic growth

The economy is expected to enter recession in 2009 and contract by as much as 2%, wiping out 2008’s GDP growth rate of 1.6%.

Austria’s economy has been generally weak for the past two decades, with annual GDP growth never exceeding 5% (the highest was in 1991 at 4.6%). After a weak start at the turn of the century (0.99% average annual growth from 2001 to 2003), Austria experienced relatively strong economic growth from 2004 to 2007 (average annual growth of 2.96%).

The strong economy was mainly due to one sector, exports, to one country, Germany. More than 75% of Austria’s exports go to Europe, 30% to Germany. Exports of goods and industry grew by 7.3% in 2006 and 8.4% in 2007. Germany, in turn, exports mainly to France, US, UK and other EU member countries.

With the global credit crunch and economic recessions in Germany, US, UK and other major export markets, Austria’s economy also suffered, but with a certain lag effect. After marginal economic growth in the first two quarters of 2008 (0.5% and 0.2%, respectively), GDP stagnated in Q3 before shrinking 0.2% in Q4.

Nevertheless, the unemployment rate (Eurostat definition) continued to move down from 5.2% in 2005 to 3.8% in 2008, the second lowest among the EU’s 27 member countries. With the recession, unemployment is expected to exceed 4.5% by the end of 2009.

Aside from shoring up financial market liquidity, the government aims to launch a bank stability initiative for central and eastern Europe, where Austrian banks have a significant amount of exposure. Austrian banks have outstanding loans equivalent to about 70% of GDP.

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.