Property price drop
Residential real estate will become around ten percent cheaper in 2023 and 2024
Property prices to drop in Austria. After rising by 30 percent since the pandemic, real estate prices are currently falling again – they are also losing value due to inflation.
In 2021, anyone who took out a 30-year loan to buy a property had to pay around 30 percent of their net household income each month. Today, in 2023, this percentage is already 46 percent.
That’s because a lot has happened in the last two years. Interest rates have risen, and at the same time it is now far more difficult for many people in Austria to get a loan – the guidelines for this were tightened in August 2022.
Couple apartment
Things don’t look any rosier for the future either: Interest rates are likely to remain high for the next three years, according to Raiffeisen analysis. “We are already at the peak and will stay here even longer now,” says Raiffeisen analyst Matthias Reith. To be sure, the experts do not expect a further increase. But the first, slow interest rate cuts will also not occur until the second half of 2024, they say. And Reith and his colleagues no longer expect zero and negative interest rates, as they were just a few months ago, in the longer term.
Far fewer loans
At Raiffeisen-Bausparkasse, a full brake has already been observed recently, as Managing Director Christian Vallant calls it. In the first half of 2023, around 550 million euros were granted as loans, compared with 973 million euros in the same period the year before. The amount of loans had also reduced extremely. In addition, an ever-increasing proportion is being used for refurbishment and renovation work and for conversions – namely around 40 percent. In the previous year, this figure was 25 percent, and before that only in the single-digit percentage range. At least this is a positive trend, as Vallant says, since the increased use of existing buildings can put a stop to soil sealing.
Furthermore, the building savings contract is currently experiencing a revival, with 170,000 new contracts already concluded this year. Vallant speaks of a “step back to normality – after all, there are now interest rates again”. Young people in particular are once again having the opportunity to save up the funds they need.
Speaking of which, the high interest rates could cause payment difficulties for those who have to repay a loan with a variable interest rate. Nevertheless, Reith does not expect borrowers on a large scale to have problems repaying their installments in the future. Especially since a run on fixed-rate loans has been observed since the beginning of the pandemic. While the number of loans with a fixed interest rate was still below five percent in 2013, 60 percent of these were already concluded with a fixed interest rate in the spring of 2020 – So these people are temporarily immune to high interest rates. Therefore, it is not to be expected that the supply of real estate will increase drastically any time soon.
One possible reason for this, however, could be the planned rent brake. Examples from other countries have shown in the past that such a cap could possibly lead property owners to sell their apartments instead of continuing to rent them out. This would deprive the rental market of supply, while at the same time increasing the supply of owner-occupied apartments, as these would then be cheaper, says Reith.
Property prices to drop in Austria – Slight decline
All this also has an impact on prices. However, these have not collapsed drastically in the last two years – as some feared – but have only fallen slightly. For the years 2023 and 2024 together, experts expect a further decline of ten percent. But even then, real estate will still be more expensive than before the pandemic. By way of comparison, before the first Corona wave, residential property was still 30 percent cheaper than it is today. However, real estate is also currently losing value because inflation is high. The price declines are then added on top of that. As a result, apartments and houses are worth around 20 percent less than before the current crisis.
Experts expect prices on the real estate market to continue to fall over the next few quarters. However, the market is divided into two segments: Newly built apartments have also recently become more expensive, which is due to higher construction costs and increased energy requirements for apartments.. Prices for re-sell apartments, on the other hand, are falling, as high investment costs can be expected here in the future. This trend of the market will also continue for some time, the expert believes.
Property prices to drop in Austria
Overall, the real estate market is in a phase of upheaval. The price expectations of buyers and sellers are currently far apart – they first have to find their way back to each other, which is also shown by the transaction figures: In the first quarter of 2023, they fell by a quarter. (Bernadette Redl, 5.9.2023)
Source: Der Standard – translated from the German.
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