Austria

Country Profile

Austria has a population of close to 8.5 million people - 3.65 million households- of whom 67.7 percent lives in urban areas. The housing stock is comprised of 4.17 million units of which 56 percent was owner-occupied in 2011. In urban areas, owner-occupation is 50 percent and 24 percent of units are public or social rental units (limited Profit Housing Associations and municipal housing) and approximately 16 percent is private rental. Slightly one quarter of the stock was built before 1945, 42% between 1945 and 1980, and one third after 1981. The capital city of Vienna, in particular, has a large old housing stock, which is in relatively good condition.

In 2011, real GDP growth reached 2.9 percent in Austria, with an expected decrease in 2012 to slightly below 1.0 percent. The Austrian economy is still mainly driven by positive developments in exports and, in particular, by the strong economic performance of German and Asian economies. Despite fiscal consolidation, private consumption was stable due to positive developments in the labour market and continued along the trends already seen in 2010.

The construction sector has developed positively in 2011 with an increase in production of 2.9 percent. Production in the residential sector even increased by 6.2 percent compared to 2010. Issuance of building permits is at a stable level of 39,500 units in 2010 and 43,300 in 2011 (new dwellings in new residential buildings). The level of 5.1 permits per 1,000 inhabitants is well above the average of “Euroconstruct” countries  of 3.5. Housing completions are developing similarly stable with 4.6 units per 1,000 inhabitants. This trend is expected to continue in 2012.

House prices went up in 2011 by 3.1% year-on-year and reached an increase of +11.0% in 1Q2012 (vs. +4.9% in 4Q2011). However, property price developments show sharp divergences between different regions/market segments. Price increases focused on Vienna, some regional capitals and some international tourism hot spots, while property prices in other parts of the country stagnated or even declined. On balance, there appear to be no strong signs for overheating in the real estate sector except for a few "hot spots". To combat rising house prices in Vienna that might result from increasing housing demand several urban development projects were initiated. The biggest project of urban development is the area of Aspern which comprises 2.4 million square meters  and shall offer 8.500 housing units for 20,000 inhabitants in the following decades as well as approximately 20,000 workplaces. The area will provide diverse tenure options.

The total amount of mortgage loans outstanding relative to GDP is relatively low at 28 percent. The year-on-year growth of mortgage loans granted to households by domestic MFIs slowed since the beginning of the financial crisis from 7.5 percent in March 2008 to 2.4 percent in May 2010, and until the end of 2011 it remained at around 1.0 percent. Interest rates for newly granted mortgage loans came down to 1.7 percent year-on-year in February 2012.

In Austria foreign currency loans are very popular. In December 2011, 33 percent of housing loans in Austria were denominated in a foreign currency. Although the foreign currency component has decreased since its peak in October 2008 (38.5 percent), it accounted for around 32% of the outstanding housing loan volume in the first quarter of 2012. However, this was probably mostly due to exchange rate effects.

The key characteristics of Austria’s housing policy are its focus on regulated (i.e. limited profit) rental housing and its financing tools. In 2011 the main emphasis was put on state and regional supply-side subsidies aimed at fostering affordable housing. Public subsidies accounted for around 0.9 percent of GDP out of which around 60 percent was spent for new construction, 25 percent for renovation and 14 percent for housing allowances. The affordable rental sector with its generous income limits – which are high enough to allow access to this sector for households up to the 8th income decile  – promotes an integrated rental market.

In March 2012 a fiscal consolidation package was released by government. Two measures might have impacts on the housing market or on residential property prices. First, the government bonus for contract saving (“Bausparkassen”) will be cut in half. Building loans savings contracts are still very popular in Austria and are incentivised by the attractive base interest rates for a mortgage loan and the overall ceiling of 6 percent over the life of the loan, and the government bonus on savings.

Second, the capital gains tax on property will be 25 percent irrespective of the length of time the property is held by the owner. The 10 year “speculation period”, which limited capital gains taxation to properties that were sold within 10 years of purchase, will be eliminated. Also, owners of secondary residences will be taxed.
The limited-profit housing sector, which is self-audited and publicly regulated, encompasses 190 limited profit housing associations which manage 820,000 housing units. Taking into account the 8% of municipality-owned rental flats, the entire Austrian social/public rental housing sector amounts to 24 percent.

Mortgage interest rate deductions on income tax are very limited and fiscal incentives to boost homeownership are of minor importance for housing policy in Austria compared to the volume of direct supply side subsidies for social housing.