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Vienna sees bigger drop in house prices than any other European capital

The Austrian capital saw one of the steepest declines in property prices over the last year – and was the only major European capital to see a double digit fall, according to new data.

Published: 18 May 2023 16:15 CEST
Updated: 19 May 2023 15:46 CEST

Vienna

A street in Vienna. Photo by Pond Juprasong on Unsplash

Having peaked about a year ago, Vienna real estate prices are down by 12.2 percent compared to what they were at this time in 2022 – to about €7,084 per square metre today.

According to the first-ever Bloomberg City Tracker, the drop is well ahead of other European capitals. Stockholm had the next largest fall with a 6.4 percent decrease.

At the same time, prices in other major cities like Madrid, Milan, and Zurich all increased over the last year.

READ ALSO: Is now a good time to buy property in Austria?

Bloomberg analysts noted that they expect prices in the Austrian capital to go down further, with stricter mortgage rules putting downward pressure on prices.

The number of mortgages issued to Austrian households has fallen by more than 60 percent since March 2022.

They also noted that the city’s rental market is creating less incentive for people to buy. Many families have affordable long-term rental contracts, including in social housing, and don’t need to necessarily think about buying.

Prices were however still higher than pre-Covid, when many people opted to move to bigger places due to working from home more.

The Austrian Central Bank estimates that homes in the country could still be overvalued by as much as 40 percent on average.

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Why are young people in Austria so pessimistic about homeownership?

Only 39 percent of young professionals think they can afford their own home with their income, according to a new GPA trade union survey

Around 1000 Austrians aged 16 to 29 participated in the survey, which shows that the expectation of being able to buy property without inheritance or help decreases with age.

Austrians aged 25 to 29 are the most pessimistic

The survey shows that as life and work experience increase, the expectation of being able to buy a home from one’s salary decreases.

Younger Austrians up to 24 years old are more likely to believe they can achieve this (44 percent) compared to Austrians between 25 and 29 years old (30 percent).

The difference becomes even more significant between those still in education (59 percent) and those who are working (33 percent).

Expectations are consistent across both low- and high-income groups.

READ MORE: How can I move into affordable cooperative housing in Vienna?

Young women least satisfied with salary

More than a third of young Austrians find that they have a salary that is too low.

In the survey, 43 percent of women expressed not being satisfied with their earnings, compared to 36 percent of men.

The survey also shows that the participants prioritise choosing educational fields where it is easy to find a job after graduation (86 percent) and where they can experience good earning prospects (84 ).

High prices, rates and strict lending criteria

One of the biggest barriers to owning a home in Austria is the sky-high property prices. Over the years, property prices have increased, making it more difficult for people with an average income to afford a place of their own.

Another factor making owning a home challenging is the increase in interest rates in recent years. As a result, both existing variable-rate loans and newly obtained fixed-rate loans have become more expensive.

Analysts expect the European Central Bank to cut interest rates by around 0.5 percent in the near future, but according to durchblicker’s calculations, this would initially only create a little relief for loan takers, where instead of around 60 percent, 55 percent of monthly household net income would be needed for debt repayment.

Difficulties obtaining a mortgage

Another issue preventing many from realising their dream to buy a home is the difficulty obtaining a mortgage.

Since July 2022, stricter rules have applied in Austria for the granting of property loans. Loan applicants must have a deposit worth at least 20 percent of the value of their property to be granted a loan.

This means that young professionals need to work for many years and earn a high income to have a chance of being accepted.

READ ALSO: Why buying property in Austria remains unaffordable for most

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