This is what the Austrian Institute for Economic Research (WIFO) states in its current “Research Brief” from today, Wednesday. Since then there has been a massive increase in the number of properties on offer. Asking prices for apartments and houses began to stagnate. Despite the slump in demand, there were “no strong price reactions” for the time being.
“The expected price correction is still very restrained and far from correcting the price increases since the corona pandemic,” emphasize the economists. The residential real estate advertisements of the Internet portal immobilienscout24.at in the five-year period between June 7, 2018 and July 2, 2023 served as the data basis for their survey. The upheaval is an Austria-wide trend. The current development includes “practically all regional sub-markets”.
The drop in demand has been reflected in a “significant decline in transactions” since autumn 2022. This can be clearly seen from the revenue from the real estate transfer tax: According to the information, the volume fell by 11 percent year-on-year in the fourth quarter of 2022 and by 20 percent in the first quarter of 2023.
Real estate stays on the market longer
Because of the gap between supply and demand, the properties on offer also remain on the market for much longer. They’re harder to market. “Not only do fewer new ads appear, but the average length of stay for existing ads also increases,” reports WIFO. On the part of the sellers, “a wait-and-see attitude” can be observed.
“Multiple shocks” would have “significantly changed” the framework conditions on the residential real estate market and subsequently triggered a slump in demand. According to WIFO, the stagnation in real estate prices and the increasing number of apartments on offer coincide with the rise in interest rates for housing loans since spring 2022. “In addition to the extremely rapid turnaround in interest rates, the tightening of lending rules should also be mentioned as a factor responsible for the abrupt responsible for the decline in real estate loans,” explained the WIFO experts.
financing situation more difficult
Due to the increased lending rates and also the significantly stricter lending regulations (KIM regulation since August 1, 2022), the financing situation has become more difficult and thus the demand for real estate has also decreased – a price-dampening factor in itself. At the same time, there are “with the massive increases in construction costs – which makes us expect a weaker development of new buildings – and the high inflation” but also factors that “should stabilize the prices of existing properties, at least nominally”. A significant downward price correction did not materialize for the time being.
After many years of constantly rising real estate prices, the real estate market has in any case “taken a break from growth”. The real estate price index of the Oesterreichische Nationalbank (OeNB) has shown “stagnating or slightly declining prices” since the fourth quarter of 2022 compared to the previous quarter. The house price index of Statistics Austria showed a decline in the first quarter of 2023 at the latest. Both indices thus showed no further price increases in residential real estate “for the first time in at least four years”. “It is unclear whether this is a breather after the sharp rises of previous years or an actual turning point with impending price declines,” say the economic researchers. “Whether there will still be more extensive price declines depends heavily on the further development of inflation and interest rates in the coming months.”
