Real Estate Crisis Is Not Yet Over
"The ice age in the real estate market is probably over," says economist Matthias Reith. In the Vienna market, home ownership increased by 0.8 percent in the first half of the year.
For the full year 2025, a nationwide average price increase of 0.5 percent for real estate is expected, and from 2026, about 3 percent per year, according to Raiffeisen. Looking ahead, there is more in favor of rising prices than against. The demand for housing will continue to grow, albeit more slowly than in the past ten to 15 years. At the same time, completion numbers are declining - in 2022 there were still 72,000 and in 2023 almost as many with 70,000, but this year fewer than 50,000 new housing units are expected to be added. Not much will change in 2026 and 2027.
Housing Shortage in Growing Urban Areas
Especially in the dynamically growing urban areas - mostly state capitals and their surroundings - the often already existing housing shortage will continue to increase. "This suggests rising real estate prices, particularly in demographic 'hotspots'," says Reith. Vienna, Salzburg, Innsbruck, and Linz account for 55 percent of the housing shortage in the country. In Vienna-Neubau and Vienna-Mariahilf, there are already 40 apartments missing per 1,000 inhabitants; in Salzburg city, there are 26 housing units per 1,000 inhabitants and in Innsbruck 23.
Since the price peak in the third quarter of 2022, real estate prices have fallen by 5 percent nationwide. At the same time, collective agreement wages and salaries have increased by 21 percent. This year, according to Raiffeisen Research, 8 years of net household income are required for an average Austrian single-family house - in 2023 it was still 11 years' earnings. Measured against collective agreement wages, affordability has increased by 27 percent. However, interest rates for a real estate loan have almost doubled since 2018, rising from 1.8 to 3.4 percent.
Rising Construction Costs in Austria
Since the end of 2022, construction costs - due to personnel costs (plus 20 percent) - have increased by almost 9 percent. Therefore, new construction prices have continued to rise over the past three years - despite weak demand. The gap between the new and used segments has widened further. Since Corona, new apartments outside the federal capital have become 19 percent more expensive compared to existing units, while in Vienna the price increase for new apartments is 13 percent. Further rising construction costs and thus new construction prices are expected according to Raiffeisen Research.
For a house purchase financed by credit, 37 percent of net income was to be planned for the monthly debt service in the second quarter of this year, compared to only 28 percent in 2018. "Home ownership is therefore affordable again. However, it is not as affordable as in times of record low credit interest rates - and it is not expected to become so," says the residential real estate market expert. Higher incomes and declining completion numbers with a growing population suggest rising real estate prices, "but foreseeable hardly more falling interest rates argue against the trees growing to the sky."
(APA/Red)
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