Real estate prices, interest rates

As few building society loans as last seen in 2012

Four out of ten young people save so that they can fulfill their future housing wishes.

(Bild: Andreas Hafenscher)

A sharp rise in interest rates, 30 percent higher construction prices than in 2020 and stricter lending guidelines have caused demand for building society financing in Austria to slump by 43 percent to around 2.1 billion euros in 2023. In order to make property affordable again, further measures are needed - in addition to the planned construction package, emphasizes the Bausparkassen-Verband.

The figures from the domestic building societies show just how tense the situation in domestic residential construction is. In the previous year, only financing amounting to 2.1 billion euros was paid out, a decrease of 43 percent. This is the lowest figure since 2012.

"The slump is worse than it has been for a long time," emphasizes Marcus Kapun, head of start:bausparkasse, even though the decline in total residential construction financing in Austria (including the "normal" banks) was even greater, falling by around 55%.

(Bild: Krone KREATIV)

The reasons for this are manifold. In particular, the sharp rise in inflation, which has increased construction costs by 30 percent since 2020, for example, the rise in interest rates and the tightening of lending guidelines by the Austrian Financial Market Authority (FMA) should be mentioned here, Kapun continued.

CEO Marcus Kapun, start:bausparkasse: "Slump in financing in private residential construction worse than for a long time".

(Bild: start:Bausparkasse)

Construction package "not the only remedy"
The "construction package" announced by the government could bring some relief here. "But it is not the only remedy," emphasizes Susanne Riess-Hahn, CEO of Bausparkasse Wüstenrot. Other measures are also needed.

For example, the building society association is calling for an increase in the state premium (2024: 1.5 percent or a maximum of 18 euros) to three percent. In addition, the upper loan limit must be increased to a contemporary level. It currently stands at 260,000 euros; according to Riess-Hahn, an amount of 350,000 euros would be sensible.

Susanne Riess-Hahn, Wüstenrot: "Property is not affordable for young families."

(Bild: APA/ROLAND SCHLAGER)

The FMA's lending guidelines (KIM regulation) also need to be revised urgently. This has overshot the mark. "We check the serviceability of a loan very carefully anyway," says Riess-Hahn. However, this has made property even less affordable for young people.

According to Hans-Christian Vallant from Raiffeisen Bausparkasse, there is currently no sign of an improvement in the situation regarding financing for residential construction. He does not expect demand to improve again until next year, for example when the higher wage settlements have reached households.

Hans-Christian Vallant, Member of the Management Board of Raiffeisen Bausparkasse: "Don't expect an improvement until next year."

(Bild: Raiffeisen)

Building society savings are experiencing a revival, four out of ten have a contract
Due to the rise in interest rates, however, building society savings experienced a revival last year. "Specifically, 512,243 new home loan and savings contracts were concluded. That's around 117,000 or around 30 percent more than in 2022," explains Andreas Kaim, CEO of s Bausparkasse.

Andreas Kaim, CEO of s Bausparkasse: "Home loan and savings is experiencing a revival.

(Bild: ELISABETH CICHON photography)

However, the volume of home loan savings has fallen by 2.6 percent to a total of 14.3 billion euros. According to a survey, just under four out of ten Austrians have a contract. In addition to the topics of "regular savings", "nest egg" or "risk-free form of investment", the topic of "higher interest rates than on a normal savings account" has recently gained in importance.

Among young people (aged 18 to 29), a remarkable 44% state that they are saving in order to be able to fulfill their future housing wishes.