Almost all parts of the country continue to show healthy growth:
- In Vienna, the capital, residential property price index rose by 3.4% (2.4% in real terms) during the year to Q3 2015. During the latest quarter, house prices in Vienna increased 0.1% (0.4% in real terms) in Q3 2015.
- In the rest of Austria, residential property prices rose by 4.3% (3.4% in real terms) in Q3 2015 from a year earlier, and increased 1.8% (2.1% in real terms) from the previous quarter.
A more bullish picture is given by Statistics Austria, based on their own statistics. Their figures show the overall house price index soaring by 9.3% (8.3% in real terms ) y-o-y in Q3 2015, the highest annual increase since the figures were first published in 2010.
By property type:
- For new dwellings, the average price rose by 5.47% (4.52% in real terms) y-o-y in Q3 2015 and increased 0.8% (1.07% in real terms) from the previous quarter, according to Statistics Austria.
- For existing dwellings, the average price surged 10.15% (9.16% in real terms) y-o-y in Q3 2015 and rose by 4.77% (5.05% in real terms from the previous quarter.
- For existing single-family houses, the average price soared by 13.41% (12.39% in real terms) in Q3 2015 from a year earlier, but increased by just 0.9% (1.17% in real terms) from the previous quarter.
- For existing flats, the average price rose by 8.79% (7.81% in real terms) in Q3 2015 from a year earlier, and by 6.62% (6.9% in real terms) from the previous quarter.
In 2015, the number of real estate transactions in Austria increased 16.6% y-o-y to 112,124 units, according to real estate firm REMAX. Moreover, the Austrian real estate market grew by 20.4% in terms of value in 2015 from a year earlier, to reach EUR23.5 billion.
In the high-end residential market, Austrians represent about 60% of property buyers in the country while the remaining 40% are foreigners, mainly from Eastern European countries like Russia and Ukraine, said Peter Marschall of Marschall Real Estate in Vienna. Wealthy Eastern Europeans are attracted to Austria due to cultural similarities. In addition, Eastern Europeans see Vienna as a very safe environment and a safe haven for their investments.
Residential property prices are expected to continue to rise this year, albeit at a modest rate, according to local real estate experts. Moreover, demand is also projected to rise further, as more foreign investors become interested in the country, partly because of the high quality of life that Austria offers. “More Italian, Swiss and American buyers are now part of this market,” says Alex Koch de Gooreynd, international residential director of Knight Frank.
Vienna is ranked as the world’s best city to live in, in terms of quality of life, according to the 18th Mercer Quality of Life study. The study examined social and economic conditions, health, education, housing and the environment.
“Vienna has ranked top in the last seven published rankings,” said Mercer. “It scores highly in a number of categories; it provides a safe and stable environment to live in, a high level of public utilities and transport facilities, and good recreational facilities,” Mercer added.
Analysis of Austria Residential Property Market »
You would not buy an apartment in Vienna now for the rental return.
That has implications for the wisdom of investing in Vienna. Generally, when yields reach a nadir, it is a sign that the market is about to turn - although some international cities like Monaco appear comfortably to weather minuscule yields for long periods of time.
Innere Stadt is Vienna’s most luxurious and least populated district, with roughly 17,000 inhabitants. But with a workforce of around 100,000, it is Vienna’s largest employment locale.
Apartments in Innere Stadt change hands at around EUR 10,000 to EUR 17,00 per sq. m., whereas in the other areas apartments cost around only EUR 4,000 to EUR 6,000 per sq. m.
Innere Stadt apartments fetch higher rents, ranging from EUR 18 to EUR 20 per sq. m. per month. These have not increased in the past two years. In the other upscale districts of Vienna, rents range from EUR 14 to EUR 15 per sq. m. per month.
Salzburg apartments cost around EUR 3,300 to EUR 4,600 per sq. m. Rents on Salzburg apartments are close to Viennese levels, at around from EUR 14 per sq. m. per month. Salzburg gross rental yields range from 3.5% to 5.3%.
Apartments are most affordable in Graz, where apartments cost, on average, EUR 2,600 to EUR 3,100 per sq. m. In Graz, rents range from EUR 9.50 to EUR 12.50 per sq. m. per month.
Gross rental yields are the highest in Graz - slightly higher than in the smaller Salzburg - ranging from 3.7% to 5.5%. The smallest apartments return the highest rental yields.
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: Capital gains realized from properties which were acquired as of 31 March 2002 is subject to capital gains tax at a flat rate of 30%.
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.
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.
However, the recent announcement that Carinthia province is now facing threat of insolvency over guarantees it made for Hypo Alpe Adria bank is a major blow to Austria’s economy. Carinthia’s local officials said that the province cannot afford to honour the EUR 10.8 billion in guarantees for Hypo Alpe Adria. Worse, creditors rejected a proposal offered by the Austrian government to buy back their bonds – a deal that could have saved the Austrian province from a possible bankruptcy. This could drag the entire economy down this year.
The Austrian economy is mainly driven by exports, mostly to its biggest trading partner, Germany. More than 75% of Austria’s exports go to Europe, 30% to Germany. Austria experienced relatively strong economic growth from 2004 to 2007 with an average annual GDP growth of 3%. After contracting by 3.8% in 2009, the economy emerged from recession with growth rates of 1.9% in 2010 and 2.8% in 2011.
Austria’s budget deficit was estimated at about 1.6% of GDP in 2015, down from around 2.7% in 2014, 1.3% in 2013 and 2.2% in 2012, according to the OeNB. The budget deficit is projected to slightly increase to 1.7% of GDP in 2016 and to stay at that level in 2017. The country’s gross public debt was estimated at 85.9% of GDP last year, up from 84.2% of GDP in 2014, according to the European Commission. The gross public debt is expected to fall to 85.1% of GDP this year and to 84% in 2017.
Unemployment stood at 5.9% in January 2016, up from 5.5% in the same period last year, mainly due to the influx of refugees in the past several months, according to the Eurostat. Despite this, Austria’s jobless rate remains well below the EU average of 8.9%. Austria’s unemployment rate is projected to reach 6.2% this year and 6.4% in 2017, according to the European Commission.
In February 2016, the country’s annual inflation rate slowed to 1%, from 1.2% in the previous month, mainly due to falling oil prices, according to Statistics Austria. However, this was higher than the EU’s average inflation of -0.2% in February 2016. Inflation is expected at 0.9% this year, before accelerating to 1.8% next year, according to the European Commission.