Market in Depth

Austria's house price rises accelerating

Lalaine C. Delmendo | July 17, 2021

Austrian housing prices continue to rise strongly, despite a struggling economy amidst the COVID-19 crisis. During the year to Q1 2021, the residential property price index in Austria was up by a huge 12.34% (10.86% in real terms), sharply up from the previous year's 3.4% growth and the biggest y-o-y rise since Q2 2012, according to figures from the OesterreichischeNationalbank (OeNB). During the latest quarter, nationwide property prices increased 3.91% q-o-q (3.56% in real terms).
  • House prices in Vienna, Austria's capital, rose by 10.94% during the year to Q1 2021 (9.48% in real terms), the highest growth in eight years. During the latest quarter, Vienna's residential property price index increased 3.28% (2.94% in real terms) from the previous quarter.
  • In the rest of Austria, the residential property price index rose by a record 14.05% (12.54% in real terms) in Q1 2021 from a year earlier – a sharp improvement from the previous year's 2.84% increase. On a quarterly basis, house prices increased 4.65% (4.3% in real terms) in Q1.

Statistics Austria's figures showed more muted results, with the overall house price index rising by 7.32% during 2020 (6.04% in real terms), following y-o-y rises of 6.24% in 2019, 4.87% in 2018, 6.55% in 2017, and 6.96% in 2016.

By property type:
  • For new dwellings, the average price rose by a modest 2.98% (1.76% in real terms) during 2020, following a strong growth of 8.09% in 2019.
  • For existing dwellings, the average price increase was 8.81% (7.51% in real terms) in 2020 from a year earlier, following a 5.55% rise in 2019.
  • For existing houses, the average price rose by 7.54% y-o-y (6.26% in real terms) in 2020, after rising by 5.48% in the prior year.
  • For existing flats, the average price was up by 9.81% (8.5% in real terms) y-o-y in 2020, an improvement from the previous year's 5.59% rise.

Construction activity is falling, despite the robust demand. During 2020, the total number of dwellings approved for construction in Austria fell 4% y-o-y to 74,763 units, following an increase of 11.4% in 2019, according to Statistics Austria. As of April 2021, total housing loans stood at EUR 127.73 billion (US$155.68 billion), up strongly by 7.5% from a year earlier, according to the European Central Bank (ECB).

Demand is expected to continue rising, because people consider real estate as a hedge against economic uncertainties and risks.

“Lots of people are scared about the future so they want to put their money in a safe place, like residential property,” said Peter Marschall of Marschall Real Estate. “We did very well in the second half of last year and we have started well this year, so we are expecting 2021 to be a good year for business.”

Austria's economy contracted by 6.6% during 2020, mainly due to the economic repercussions of the COVID-19 pandemic and related containment measures. 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 annual house price change graph
The economy is expected to return to growth this year, as remaining curbs are gradually lifted amidst an accelerated vaccine rollout. The economy is projected to grow by a modest 3.4% this year and by another 4.3% in 2021, according to the European Commission.

There are no restrictions on foreigners buying properties in Austria.

Analysis of Austria Residential Property Market »

Rental Yields

Property prices continue to rise in Austria and yields are poor

Property prices in Vienna continue to increase amid the pandemic. Therefore, you can expect that gross rental yields - the return on investment on a property before all expenses - are weak. But you can generate higher yields in less expensive districts. It all depends where you buy.

In Innere Stadt, apartment prices range from EUR 15,000 to EUR 25,000 per square metre (sq. m.) and rents range from EUR 19 to EUR 24 per square metre (sq. m.). Gross rental yields in Innere Stadt range from 1.14% to 1.82%, roughly the lowest rental yields in Vienna. With this kind of rental return, no-one is buying a property to be purely to be rented out. Innere Stadt is considered the most expensive district of Vienna by price per square metre.

But moderate yields can be generated in Leopoldstadt, Margereten, Favoriten, Simmering, Meidling, and Brigittenau, where apartment prices are around EUR 5,000 to EUR 11,000 per square metre (sq. m.). Margereten apartments can be rented out at around EUR 13 to EUR 19 per square metre (sq. m.) and tend to cost around EUR 5,000 to EUR 9,000. Leopoldstadt is somewhat close to Margereten, where apartments cost around EUR 6,000 to EUR 7,000 per square metre (sq. m.) and rents range from EUR 15 to EUR 21 per square metre (sq. m.) per month. Gross rental yields in these districts range from 2% to 4%.

In Salzburg, approximately 200 miles apart from Vienna, apartment prices tend to be around EUR 6,997 to EUR 10,907 per square metre (sq. m.). Rents in Salzburg apartments range from EUR 14 to EUR 18 per square metre (sq. m.), which is pretty close to Viennese levels. Salzburg's gross rental yields range from 1.55% to 3.12%.

More affordable apartments can be found in Graz, where apartments cost, on average, EUR 4,738 to EUR 5,096 per square metre (sq. m.) And rents range from EUR 9.96 to EUR 13.21 per square metre (sq. m.) per month. Gross rental yields in Graz are slightly better than in Salzburg - ranging from 2.52% to 3.29%.

Round trip transaction costs are high residential property in Austria. See our Residential transaction cost analysis for Austria.

Read Rental Yields »

Taxes and Costs

Rental income tax is high in Austria

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: 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.

Read Taxes and Costs »

Buying Guide

Buying costs are high in Austria

Total roundtrip transaction costs are high at between 9.40% and 13% of the property value or sales 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.

Read Buying Guide »

Landlord and Tenant

Austria has a pro-tenant rental market law

Austria housesAustrian law is tenant-friendly, with rent control at somewhat below free-market levels.

Austria houses 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.

Read Landlord and Tenant »


Pandemic-induced economic recession

Austria’s export-reliant economy contracted by 6.6% during 2020, mainly due to the economic repercussions of the COVID-19 pandemic and related containment measures, typical of contractions observed across the eurozone. 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.

In Q1 2021, the economy continues to struggle, with real GDP declining by 5.5% y-o-y, following annual contractions of 5.6% in Q4 2020, 3.8% in Q3, 13.6% in Q2 and 3.6% in Q1.

austria GDP and inflation chart
Despite this, the Austrian economy is expected to return to growth this year, as the remaining curbs are gradually lifted amidst an accelerated vaccine rollout. The economy is projected to grow by a modest 3.4% this year and by another 4.3% in 2021, according to the European Commission.

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 1.8% in 2010 and 2.9% in 2011. Though the economy has stagnated in recent years, posting an average real GDP growth rate of 1.3% annually from 2012 to 2019.

In 2020, the country recorded a huge budget deficit of 8.9% of GDP, in sharp contrast to surpluses of 0.6% of GDP in 2019 and 0.2% of GDP in 2018, according to Statistics Austria, as government spending surge to ease the impact of the COVID-19 crisis on economic activity. The budget shortfall is projected to fall slightly to about 7.6% of GDP this year, according to the European Commission. Though the country’s gross public debt was estimated to continue rising to 87.2% of GDP this year, up from 83.9% in 2020 and 70.5% in 2019.

In May 2021, the unemployment rate improved to 7.7%, compared to 8.6% in the previous month and 11.5% a year earlier. Yet it remains far above the average jobless rate of just 5.2% from 2009 to 2019.

Inflation stood at 2% in March 2021 – the highest level achieved since February 2020, according to Statistics Austria. The European Commission expects Austria’s inflation at 1.8% this year.

Caps on refugees, coalition deal between the Austrian conservatives and Greens
Austria has been among the EU members with the highest numbers of asylum applicants since 2015, with about 90,000 applications. Vienna took in 43,200 people to reach a total population of 1.84 million. Of the 141,718 registered unemployed in the city, around 58,000 were foreigners, representing a 17% annual increase in the number of jobless foreigners in the city.

austria unemployment
Aside from having a direct effect on the country’s unemployment rate, Statistics Austria also reported that more than half of all asylum seekers in Austria commit crimes. More specifically, from 2004 to 2014, almost every other migrant had committed some kind of criminal offence after coming to the country and seeking asylum. The report revealed that about 80% of the criminals were young men. Moreover, a number of suspected jihadis were detained in 2016 after a series of raids in cities across Austria.

To address these concerns, the government announced in January 2016 that they would set a maximum number of 37,500 asylum applicants annually in the next four years. The following month, Austria introduced a cap of 80 asylum seekers a day allowed to enter the country to make an asylum application, while 3,200 persons are allowed to transit toward other countries.

The government also revealed a plan to deport about 50,000 failed asylum seekers over the next four years.

In fact in February 2016, the Minister of Interior Johanna Mikl-Leitner announced that the "Balkan route", the main passage used by migrants, commonly from the Middle East, to reach affluent countries to the north, would be closed permanently.

As a result, asylum applications fell dramatically to 24,735 in 2017, 13,746 in 2018, 12,886 in 2019 and to 14,775 in 2020, according to Statistics Austria. In 2020, about 35% of asylum applications came from citizens of Syria, followed by Afghanistan (21%), Morocco (5%), Iraq (4.9%), and Somalia (4.8%).

The immigration crisis has had a substantial political impact. In the legislative elections of 2013, the Social Democratic Party (SPŐ) and the Austrian People’s Party (ÖVP) - a Christian Democratic party - emerged with the highest number of seats (27% of the vote and 52 seats for the SDP, and 24% and 47 seats for the People’s Party) and formed a ‘grand coalition’.

However in May 2017 the ÖVP elected a new young leader, the right-wing populist Sebastian Kurz. Kurz had previously called for stricter controls on migrants, and steered through an Islamgesetz (Islam Law) prohibiting the funding of mosques by entities from abroad, paying imams’ salaries, and regulating the version of the Quran that may be used in Austria.

austria asylum applications
Partly as a result of his leadership the Grand Coalition broke in mid-2017, and a snap election held in October was won by the ÖVP which took 31.5% of votes and 62 of the 183 seats. The SPŐ was second with 26.9% and 52 seats. The ÖVP disdained its previous socialist partners and formed an alliance with the newly-strong right-wing Freedom Party of Austria (FPÖ) which had finished in 3rd place, receiving 26% of the votes and 51 seats.

The victory of the center-right People’s Party (ÖVP) and the radical right Freedom Party (FPÖ) further strengthened the country’s insistence on restricting immigration and limiting support for immigrants. As Chancellor, Kurz has brought Austria closer to the Visegrad Group, particularly the Eurosceptic and populist governments of Andrej Duda in Poland, Victor Orban in Hungary, and Milos Zeman in the Czech Republic.

The government has stopped the private housing of asylum seekers, providing instead only centralized accommodation facilities. Moreover, it also substantially reduced minimum social welfare support for recognized asylum seekers, reduced access to German courses and apprenticeship programs and take their cash to help pay for basic needs.

As Austria held the EU’s rotating presidency in 2018, Kurz has made curbing unregulated migration a priority not just in the country but in Brussels as well. In fact in October 2018, the Austrian government announced its withdrawal from the UN global migration pact to promote safe and orderly migration (known as the Global Compact for Safe, Orderly and Regular Migration).

However tension between Kurz and his coalition government has increased steadily since it was formed, and the FPÖ’s “Ibizagate” scandal, in which leading FPÖ members were taped agreeing to helping a Russian oligarch with Austrian connections in return for financial support, and revealing contacts with Russian President Putin with a view to forming a "strategic alliance", caused Kurz to be voted out of office in a Parliamentary no confidence vote in May 2019.

During the September 2019 snap election, Kurz’s ÖVP won the most votes of 37.5%. The FPÖ suffered heavy losses while the Greens scored their best-ever result, receiving 13.9% of votes, amidst growing calls for urgent action on climate change. In January 1, 2020, Kurz struck a coalition deal with the Greens to ensure his return to power and bring the left-wing party into government for the first time. The Greens will control 4 of 15 ministries.

Recently, anti-corruption prosecutors opened an investigation involving Kurz over allegations that he made false statements to a parliamentary commission. Earlier in February 2021, the home of close ally and finance minister GernotBlümel was raided by prosecutors in an investigation into illegal party funding involving a gambling company.

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