Real estate market: Experts expect prices to relax slightly

The Austrian Association of the Real Estate Industry (ÖVI) and the real estate service provider EHL take a similar view in their forecasts presented this week. “After a decade of constantly rising prices, a ceiling seems to have been reached,” says Andreas Wollein, board member at ÖVI. The prices calmed down. But that doesn’t mean it’s going to be cheaper. For this year, Wollein expects stagnation or a moderate price increase of around five percent.

Mix of factors responsible

The demand for real estate has fallen noticeably in recent months, especially for objects that cost more than 500,000 euros. Inquiries have “moved more in the direction of rent,” says Wollein.

According to the expert, this is due to high inflation, rising interest rates, energy prices and strict award criteria for real estate loans. Michael Ehlmaier, Managing Partner of the EHL Immobilien Group, takes the same line: “The market has coped well with rising raw material prices, economic weakness, supply chain problems and the start of the Ukraine conflict, but the changed interest rate policy and the resulting significant increase in financing costs have both negatively impacted transactions and prices.” The relative attractiveness of real estate investments has deteriorated, especially for institutional investors. A lot of money has flowed into other markets and segments, especially into fixed-income securities in the USA, according to Ehlmaier.

The ÖVI board member, Wollein, sees things less dramatically. The association believes in the value stability of real estate. There is no pressure to sell. Real estate is in good hands in the private and commercial sectors, “and the prices should be maintained”. Property developers are currently unable to offer a lower price per square meter than 6800 euros for new buildings, says Wollein with regard to construction and land costs.

Wollein and Ehlmaier agree that lower demand is to be expected in individual market segments. This applies, for example, to high-traffic areas. This also includes properties with difficult rental situations or greater need for action to achieve environmental and climate goals. In the case of top properties, however, the price adjustment will be limited.

Criticism of the ordering principle

The ÖVI is skeptical about the ordering principle, which will apply in Austria from July 1st. From then on, only the person who commissions a broker has to pay for it. “The double broker activity, which was practice for more than 100 years, will be buried this year,” regrets ÖVI President Georg Flödl. The broker “looked after both sides equidistantly”, i.e. to the same extent. When the ordering principle was introduced in Germany in 2015, it led to a “massive decline” in brokerage companies and “massive job cuts” in the industry.