"Won't Be a Bomb": Expert Debunks Government Program on Housing
"This government program will not be a bombshell," said Wifo economist Michael Klien in an APA interview on Friday. These are adjustments that became necessary due to court rulings, "but very large effects on the housing market are not to be expected," Klien added.
Rent Cap with Limited Impact
The government program presented on Thursday envisions a gradual capping of rent prices for the regulated market over the next three years. From 2028, a limitation on rent increases to a maximum of three percent will apply in the "entire housing sector." If inflation exceeds three percent, increases will then be curbed and only half will be passed on to tenants.
Housing should become more affordable through these measures. However, "one must be a bit cautious," warned the expert. "Part of the rent adjustment does not happen within a tenancy, but since many contracts are also temporary, the increases often come with the new contract," Klien explained. "This is not covered by the regulation."
No Increase in Rents Expected in Advance
Klien does not foresee immediate price increases in the next three years in the unregulated housing sector to compensate for the upcoming cap. "The rents currently demanded on the market already push the limits of willingness to pay," said the economist.
Furthermore, this new "housing index" of three percent is for a "phase of high inflation, which is not expected in the coming years," the economist estimates. Ideally, inflation is at two percent, currently it is around three percent. The planned measures will therefore "not cause major effects" on the housing market, except perhaps to resolve "simmering discussions and legal uncertainties in the background."
According to Klien's assessment, it will also have minor effects on inflation. "Immediately, it will not be very noticeable, but it breaks the vicious circle a bit," the expert believes.
Fixed-Term Contracts Remain Despite Extension
The economist believes that the new government's intention to increase the minimum duration of fixed-term rental contracts to five years will also have little impact. "The general trend towards fixed-term contracts will not change," said Klien. While it may be a "stabilization of living conditions for tenants, I don't think it will realistically lead to fewer fixed-term contracts being issued."
These measures primarily benefit tenants. According to Klien, a central factor for landlords is the "correction of invalid value adjustment clauses" - in response to a Supreme Court ruling. This has limited the risk of repayments for the real estate industry to five years. "The real estate industry can count this point as a win," Klien noted.
New Standards Could Trigger Investment Boom
Meanwhile, the Austrian Association of Home and Property Owners warned of a deterioration in the building stock. Due to lower rental income, fewer renovations could be carried out. Klien does not see this risk in light of the planned decarbonization system. In the future, the "energy quality of buildings and apartments" should be considered when determining rent. "If this goes in a similar direction as in the 1980s, it could trigger an investment boom because landlords could then charge higher rents," Klien believes.
Expert Sees No Major Tenancy Law Reform
For Klien, "affordable housing" in the government's program stands for "stabilization and further regulation" in the rental sector. Unlike past government programs, the future government does not intend to implement a "major tenancy law reform," as they are "realistic, no one has managed it in the last 20 years either."
(APA/Red)
This article has been automatically translated, read the original article here.