The demand for apartments in Vienna is still “very strong and unchecked” – this applies to the rental sector as well as to property. This is shown by a study by EHL real estate group. At the same time, the supply is scarce and will not improve in the future, which is why prices will continue to rise. The purchase price is expected to rise by 5 to 7.5 percent this year.
Fewer building permits
With almost 1,000 apartments more than in the previous year, 17,600 completed apartments are expected in the federal capital this year. In the coming year, more than 18,000 objects are expected. “The demand for condominiums will again significantly exceed the supply,” says EHL-Wohnen managing director Karina Schunker.
The number of completed new apartments will “be significantly lower from 2023,” says Schunker. This can be attributed to the decline in building permits. In 2020 there were still many building permits, which this year and next year will ensure many completions.
Apartments are getting smaller
The high inflation and the persistently low interest rates would turn investment apartments into a much sought-after investment model, says Schunker. The average size of the units sold continues to decline slightly. It is more likely to be bought according to the number of rooms – two-room apartments are 35 to 45 square meters in size, three-room apartments up to 65 square meters.
The forecast for the average total purchase price this year is 245,000 euros. That is an increase of 10,000 euros compared to the previous year.
The square meter price in the pension segment is likely to increase by 8.8 percent to an average of EUR 4,850 in 2021. The increase is also due to the increased construction and material costs.
According to EHL, there is a shift in the supply structure towards rental apartments. “This year we have 65 percent of the apartments in the rental sector, both privately financed and subsidized,” says Schunker. The rents for the first rental increase more moderately than the purchase price. After 12.21 euros net per square meter, EHL expects an increase to 12.35 euros this year.
The result is falling returns, which should fall to an average of 3.2 percent. The average rental period is five years – the minimum period is three years. But the supply of condominiums is also at a low level and is likely to become significantly scarcer again in the coming year.
From the center to the periphery
New living space is currently being created in Vienna mainly in urban development areas or on the outskirts, such as around the main train station, in Donaustadt, Floridsdorf, Liesing and Favoriten. There is generally a shortage of building plots.
Building materials are available
However, the EHL-Wohnen boss locates relaxation in the massive increase in construction costs as a result of supply chain problems during the corona pandemic, which have exceeded the peak, says Schunker. “The availability of raw materials has improved again for steel and wood and therefore prices have fallen again,” it says.
The EHL manager does not fear a real estate price bubble like the one recently seen by the National Bank (OeNB). “We can see that capital is actually available on the market and that the buyers have sufficient own funds,” said Schunker, referring to the buyers of pension apartments. But even for owner-occupiers, an equity ratio of 20 to 30 percent can be assumed. Banks are “still very restrictive when it comes to lending and are checking income levels and guarantees”.