Hardly any sales left

Housing shortage: “New construction market in Austria is dead”

New construction output has fallen drastically.

(Bild: Karl Schöndorfer TOPPRESS)

The domestic real estate industry is sounding the alarm and warning of a housing shortage and more unemployed people. As interested customers are not getting any money from the bank, many estate agents often do not sell a property for months. Hardly any new apartments are being built either.

"The new-build market is currently dead," said Gerald Gollenz, chairman of the real estate association. Hardly any apartments are being sold. The forecast for 2025 is getting worse by the day. "We are already talking about an 80 percent drop in new construction," said the expert. This would also have a massive impact on the entire economy and the workforce - from large corporations to house-sitters. More and more construction workers now have to "go on the dole" in the warm season, something that has never happened before. In addition, a housing shortage is to be expected throughout Austria.

Easier lending from July 1
For months, the real estate industry has been blaming the KIM regulation with its stricter lending rules from the Financial Market Authority (FMA) as one of the reasons for the slump in apartment sales. There will be relief on this front from July 1, 2024, as the rules for exception quotas, where not all provisions have to be complied with, have been simplified.

We are already talking about minus 80 percent for new construction.

Gerald Gollenz, Obmann des Immobilien-Fachverbands

Borrowers still have to meet certain requirements. For example, the equity share for taking out loans must be at least 20 percent. In addition, housing loans may not run for longer than 35 years and the repayment installment may not exceed 40 percent of the net disposable household income. 20 percent of the new customer volume may deviate from this. However, this option has not been used to date due to its complex regulations. 

Poor sentiment on the market
However, there is also a poor mood on the market: because it is constantly being said that nobody can afford property any more, many people do not even ask for a loan, according to Michael Pisecky, chairman of the Viennese specialist group. His colleague from Lower Austria, Johannes Wild, knows of estate agents and property developers who sold their last property nine months ago.

As interested customers do not receive any money from the bank, many estate agents often do not sell a property for months.

(Bild: APA/BARBARA GINDL)

Due to the sharp rise in construction costs and interest rates, many real estate developers have come under pressure after a boom phase of several years last year. Medium-sized companies have been particularly hard hit and some have gone bankrupt. In addition to the insolvencies, there is also the question of what will happen to the unfinished apartments. Property developer spokesman Hans Jörg Ulreich assumes that projects that are close to completion will also be completed. This is because the banks also know that nothing is worth less than a half-finished construction site.

Ulreich reported that it is not only home buyers who are finding it increasingly difficult to obtain loans, but also project developers. In his own case, it had recently taken eight months instead of the usual three weeks to obtain financing. He criticized the FMA, saying that young WU graduates were threatening bank managers with reliability checks. He called on the head of the FMA, Helmut Ettl, to "switch on his brain and abolish the KIM regulation".

The government's economic stimulus package lacks details
Another point of criticism: parts of the government's announced construction stimulus package are not working. For example, there are unanswered questions about the state-subsidized loans of up to 200,000 euros, which are not supposed to attract market interest rates of over 4 percent, but only 1.5 percent. It is not yet clear who is entitled to the cheaper money. Many young families are therefore waiting to fulfill their dream of owning their own home.

Because it is becoming increasingly difficult for families to fulfill their dream of owning their own home, rental apartments are more in demand.

(Bild: stock.adobe.com)

Rental apartments more in demand and sometimes more expensive
As fewer and fewer people can afford to own their own home, rental apartments are more in demand and sometimes more expensive on the open market. However, experts believe that a rent cap would not improve matters for certain population groups. The high demand would allow landlords to choose their tenants. "People with high incomes will then win the race, as landlords want security," Pisecky is convinced.

If we react now, the trough will not be so deep and the upswing will be quicker.

Gerald Gollenz

Gollenz emphasized that it was only a matter of damage limitation. "If we react now, the trough will not be so deep and the recovery will be faster." The industry representatives therefore want to increase the pressure with a new demands paper at the beginning of July.