No Relief for the Austrian Housing Market in Sight

The housing shortage is increasingly worsening. "After the peak in 2021, the developer business has collapsed - meaning we will have fewer completions; meaning there are fewer apartments on the market," said the board member of the Austrian Association of Real Estate Industry (ÖVI), Thomas Raith, on Wednesday in Vienna. However, the demand is increasing. "We believe that the supply situation will not improve in the next two years," said association president Georg Flödl.

Housing Shortage Will Not Improve

"In the hotspots, in the metropolitan areas, there is a very large housing shortage," noted managing director Anton Holzapfel during the association's annual press conference. "By 2027, we are talking about half or a third of completions missing," Flödl clarified. At the same time, the demand is rising.

Only "Shelf Warmers" on the Market

According to the real estate association, the current market supply mainly consists of "shelf warmers" - new apartments that are too expensive, or do not fit in terms of layout or size. "But nothing new is currently coming onto the market," said Raith. In Vienna, there are 20,000 apartments on the market that are to be sold, and 8,000 rental apartments.

"The absorption - the sales figures that the market takes up per year - has fallen significantly," said the developer spokesperson. "Not much is affordable for the average household." Furthermore, there is high uncertainty among private individuals - not least due to the geopolitical situation. "No one is buying a developer apartment that has not yet been built - but the banks demand it," reported the ÖVI board.

The increased interest rates have done their part. The savings rate has increased significantly. However, the money has not been invested in real estate.

Used Housing Market Relatively Stable

"People have virtually stopped going into new construction," said Raith. The return achieved in new construction is 4 percent. That is "not attractive." "Investors demand a return of 4.5 to 5 percent due to their risk premium," explained the real estate expert.

"In the past eight years, everything has focused on the used housing market." This market is relatively stable, confirmed the regional director of the real estate association in Carinthia, Max Madile. In the developer and new construction market, the trend is also "continuing to decline" in the south. In terms of transactions, they are "on the way to the worst year." Mainly new constructions that are already completed are being sold.

Buyers Are Uncertain

The same picture is seen in the west of Austria: "The market is subdued - new construction projects are only being sold as existing and no longer off-plan," said ÖVI Vice President Andreas Karg. "We also feel uncertainty here, given the global political situation, to make long-term investments," he added. The demand for housing is there - "and it is being met from existing stock."

However, demand is increasing. In Vorarlberg, there are "encouraging building permit numbers, but it will take another three to four years for them to come onto the market," said Karg.

Problem Child New Rentals

"If ownership is difficult now, many turn to renting," Holzapfel summed up the situation. The problem child in the current environment is new rentals, emphasized Flödl, referring to low approval and completion numbers. In 2024, rents increased by an average of 6.2 to 7 percent. "We assume that it will not have been much different in 2025."

"Basically, we are in a strongly price-regulated segment," said the ÖVI President. 43 percent of primary residences in Austria are main rental apartments. Of the 1.77 million main rental apartments, 1.3 million are in the price-regulated sector - either social (municipal or cooperative) or under the scope of the Tenancy Law (MRG).

Politics Intervenes - But Does Not Invest

In the price-regulated sector, the government has promised some relief for tenants. After the massive increases during the high inflation, rents should only be allowed to rise by a maximum of 1 percent in 2026, and only 2 percent in 2027. In 2028, inflation-related increases exceeding 3 percent should only be allowed to be added to the rent by half. "Such individual measures do not increase trust," Holzapfel commented from an owner's perspective.

"Political interventions do not improve the supply - investments are rather postponed," Flödl fears. The rental market could continue to come under pressure. "We are in a supply dip that we need to get out of." Planning security and trust are "the most important soft facts we need in the coming years," he also said with regard to the framework conditions for the energy transition.

(APA/Red)

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