Wednesday, September 27, 2023

Austrian Real Estate Market: Raiffeisen Predicts Price Decline

Raiffeisen Bank expects a controlled fall in Austrian real estate prices. Explore factors influencing this forecast in 2023 and 2024.

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Maximilian Müller
Maximilian Müller
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Austrian Real Estate Market

Raiffeisen Bank anticipates a mild decline in real estate prices in Austria for the year 2023 and continuing into 2024. Despite initial concerns, the real estate market has displayed surprising resilience, with a slowdown in price declines during the first half of 2023. This moderation in price declines is attributed to rising prices for new apartments, while demand remains subdued, and financing has contracted.

The current headwind in the form of low-interest rates is influencing the real estate market. Raiffeisen economist Matthias Reith expects this adjustment to be measured, stating that after years of significant price increases, they anticipate a controlled fall in prices, possibly up to ten percent in 2023 and 2024. However, even with this correction, homeownership is expected to remain more expensive than before the pandemic.

A notable trend in the real estate market is the divergence between new and used apartments. Since mid-2022, new apartments have continued to increase in price, while used apartments have become considerably cheaper. This unique price development for new apartments has contributed to the market’s moderate price correction.

Affordability is expected to impact demand for property, but existing borrowers may not face significant difficulties when interest rates change, reducing the likelihood of a sharp price correction. Additionally, Austria’s population is still growing, and while the number of new builds is declining, it is expected to provide support to the market.

According to Raiffeisen Bausparkasse, the demand for real estate financing has seen significant changes in 2023. Rising inflation and interest rates have led to a nearly 70 percent year-on-year reduction in overall demand in the first half of 2023, with financing for newly built properties experiencing a 20 to nine percent drop this year. Instead, financing for refurbishment, renovation, conversion, and extension projects has increased significantly, reaching almost 40 percent of loans granted.

The real estate market’s dynamics are influenced by various factors, including interest rates, demand, and evolving buyer preferences, and Raiffeisen expects these trends to continue shaping the market in the coming years.

Raiffeisen Bank anticipates a controlled decline in real estate prices in Austria, with a specific focus on the divergence between new and used apartments and evolving financing preferences. The overall real estate market is expected to remain stable, with the potential for a moderate correction in prices.

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