Government remains silent

Government remains silent on financial consequences

(Bild: jozsitoeroe - stock.adobe.com)

With the "housing and construction offensive", the government promises to make property affordable again and stimulate the construction industry. So far so good. But how exactly is this plan to be financed? The parliamentary budget service, which is independent of the parties, has now taken a close look at the package.

However, this has proved to be more difficult than originally assumed - because the governing parties are keeping quiet about the financial impact of the individual measures, reported the Vorarlberger Nachrichten newspaper on Tuesday.

According to the newspaper, economists from the budget service criticized that this also meant that the effects on taxpayers were unclear. The parliamentary budget service has calculated that around 2.5 billion euros will be distributed for this package by 2027. And a further package may be needed.

This is because the economic impact of the housing package depends on fresh investment in residential construction: "In its forecast from March, the Economic Research Institute expects gross fixed capital formation to fall by 2.0 percent overall in 2024 and rise again by 2.2 percent in 2025. Construction investment is forecast to fall by 4.0% in 2024, followed by an increase of 1.5%."

(Bild: simona - stock.adobe.com)

Slight price-driving effects to be expected
However, the budget service was more critical of other measures: "For example, the craftsmen's bonus and the suspension of ancillary fees for owner-occupied homes are expected to have a high deadweight effect and therefore a low economic impact." However, according to the economic research institute Wifo, housing subsidies are also expected to have a low economic impact in the current year and a moderate increase in 2025. The Institute for Advanced Studies (IHS) expects slightly higher effects for the economy. However: "As the effect of the measures will be delayed in some cases, there is a risk that the economic stimulus package will have a procyclical effect in the medium term."

The housing package will further increase land consumption, the budget service noted. Renovations and the restrictions on high-density and multi-storey residential construction, on the other hand, would have a dampening effect. "The obligation to install photovoltaic systems supports the expansion of renewable energy," the budget service also stated. In terms of property prices, a higher supply would also be offset by higher demand, meaning that slightly price-driving effects could be expected.