Housing affordability has fallen strongly in a long-term comparison
- Property prices in Austria fell for the first time in almost 20 years in 2023
- Despite the slight easing in 2023: The affordability of housing has fallen strongly in a long-term comparison
- Bank Austria puts together a 100 million euro housing package: favourable fixed-rate loans for up to 500 families in Austria
According to a UniCredit Bank Austria analysis, the rise in interest rates for residential construction financing as a result of the tightening of monetary policy by the ECB and the strict regulations for the granting of residential construction loans in 2023 led to a slight decline in property prices in Austria for the first time since 2004. However, in view of the continuing high demand for housing due to the growing population and the attractiveness of property as an investment property, there was no massive price correction.
“Property prices in Austria fell by around 1.5 per cent on average compared to 2022, while net incomes in Austria rose by almost 8 per cent, meaning that the real value of an average Austrian net income in relation to property prices has increased by around 10 per cent over the past year”, says UniCredit Bank Austria Chief Economist Stefan Bruckbauer.
15 annual salaries required for a 100 square metre condominium
According to estimates by economists at UniCredit Bank Austria, the average price per square metre for condominiums in Austria will fall to just over 4,350 euro in 2023 and to around EUR 2,850 for single-family homes. This corresponds to a decrease of less than 100 euro in each case compared to the previous year, although not for new flats and single-family homes.
With an average annual Austrian net income of just over 28,000 euros, a dependent employee could therefore buy around 6.5 square metres of a condominium or 10 square metres of a single-family home in 2023. This is a gain of half a square metre for flats and even almost a square metre for single-family homes within a year, mainly thanks to the high wage dynamics.
Or to put it another way: in 2023, Austrian employees had to invest an average of over 15 annual salaries for a condominium of 100 square metres and around 10 annual salaries for a house of the same size. In 2022, it was one year's salary more for a condominium and almost 1.5 years' salary more for a detached house.
Despite slight easing in 2023: Housing affordability has fallen in a long-term comparison
From the start of the property price rally almost 20 years ago, residential property prices rose significantly faster than incomes up to and including 2022. The affordability of residential property has fallen significantly since then, despite the development in the previous year. Average net income has increased by more than 64 per cent since 2004. However, residential property prices have risen by well over 100 per cent during this period.
According to economists at UniCredit Bank Austria, the value of the average net income of employees in Austria in relation to property prices has fallen by over 45 per cent since the property rally began around 20 years ago. Instead of around 14 square metres in 2004, an annual income in 2023 was only enough to finance around 7.5 square metres of living space, despite the slight improvement in the previous year.
In addition to the long-term deterioration in the ratio of property prices to income, the recent rise in interest rates, strict lending guidelines and sharp increases in construction prices have reduced the affordability of housing for individuals in Austria.
Decrease in lending
The rapid increase in key interest rates by the ECB led to a rise in interest rates for residential property loans, resulting in a noticeable increase in the cost of property financing. In combination with the restrictive statutory lending regulations, the rise in interest rates led to a sharp decline in loan financing in Austria. The average monthly lending volume fell from almost 2.5 billion euro in the first half of 2022 to an annual average of only around 900 million euro in 2023. On average for 2023, new residential construction financing business in Austria fell by around 55 per cent.
Construction prices rose significantly faster than construction costs in 2023
In addition to higher financing costs, demand for residential property in 2023 was also dampened by the significant rise in construction prices. While construction costs only increased by just under 1 per cent on average in 2023 compared to 2022 due to falling material costs despite higher labour costs, construction prices rose by around 7.5 per cent according to estimates by UniCredit Bank Austria. Due to the still relatively good capacity utilisation, the slowdown in construction cost growth was only passed on to customers with restraint in favour of the profit margin.
The continued restrictive monetary policy for the time being with unchanged lending regulations for residential property financing in Austria and the declining growth in housing demand point to another year of falling property prices in Austria.
“As the decline in property prices will be accompanied by a further rise in incomes in Austria, the long-term gap between property price and income growth is expected to narrow again. The affordability of housing will therefore improve again slightly on average in 2024. In addition, the prospect of the ECB beginning a cycle of interest rate cuts and the government's housing construction offensive should gradually give potential house builders in Austria some tailwind again”, says UniCredit Bank Austria economist Walter Pudschedl.
100 million euro residential package from UniCredit Bank Austria
UniCredit Bank Austria has put together a 100 million euro housing package with favourable conditions to support the purchase of a first home. This enables up to 500 families to obtain favourable fixed-interest loans of up to 200,000 euros at a fixed rate of 2.99 percent p.a. for 10 years.*
Robert Zadrazil, Chairman of the Management Board of UniCredit Bank Austria, emphasises: “Promoting affordable housing in Austria is the order of the day for us. That is why we have put together an attractive housing package totalling 100 million euros to support families and young people in particular in buying their first home. We are a reliable and highly competent partner when it comes to financing housing and support our customers, particularly in terms of subsidised advice. The aim is to enable the creation of attractive living space and to ensure this in the future.”
Inquiries:
UniCredit Bank Austria Media Relations
Matthias Raftl, Tel.: +43 (0) 5 05 05-52809;
E-mail: matthias.raftl@unicreditgroup.at
Inquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05-41957;
E-mail: walter.pudschedl@unicreditgroup.at
* UniCredit Bank Austria is offering favourable fixed-rate loans of up to EUR 200,000 at a fixed rate of 2.99% p.a. for 10 years to finance the first home for families (at least two people registered as the main residence, no other property ownership) from the beginning of April 2024. Amounts exceeding the maximum amount for this offer of 200,000 euros will be financed at current standard conditions. If the special conditions are utilised, the total financing volume is limited to 500,000 euros and must be taken out via UniCredit Bank Austria.