Residential property prices continued to increase, but at a slightly slower pace
()Residential property market developments in Austria and CESEE
In its latest international property market review, the Oesterreichische Nationalbank (OeNB) analyzes real estate market trends, both in Austria and in Central, Eastern and Southeastern European (CESEE) countries. In Austria, prices of residential property continued their uptrend in the second quarter of 2021 year on year. In the CESEE region, the overall annual growth rate of residential property prices declined slightly in the first quarter of 2021, with some countries still reporting strong price growth, however.
While slightly decelerating, property prices in Austria still increased strongly
In the second quarter of 2021, residential property prices continued to grow above 10% both in Vienna and in the rest of Austria. In Vienna, property prices increased by 10.7% and prices in the other provinces rose by 12.8% year on year. For Austria as a whole, price growth came to 11.7% in the second quarter, following an increase of 12.3% in the first quarter. The clear uptrend therefore continued for the fifth quarter in a row. Quarter-on-quarter price growth in Austria as a whole dropped from 3.9% in the first to 2.4% in the second quarter. In light of the marked price growth, the OeNB’s fundamentals indicator for residential property prices in Austria went up significantly. At 28.2%, the indicator for Vienna had increased by 3.3 percentage points compared to the previous quarter. The figure for Austria as a whole amounted to 19.4%, having edged up by 1.8 percentage points quarter on quarter.
| Q2 21 | Q1 21 | Q4 20 | Q3 20 | Q2 20 | Q1 20 | Q4 19 | Q3 19 | Q2 19 | 2020 | 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual change in % | |||||||||||
| Austria | 11,7 | 12,3 | 10,0 | 9,5 | 5,2 | 3,4 | 3,0 | 2,3 | 5,6 | 7,0 | 3,9 |
| Austria excl. Vienna | 12,8 | 14,9 | 10,7 | 9,7 | 6,8 | 2,8 | 1,2 | 1,7 | 3,6 | 7,7 | 2,6 |
| Vienna | 10,7 | 10,9 | 9,4 | 9,4 | 4,1 | 3,9 | 4,3 | 2,7 | 7,0 | 6,7 | 4,9 |
| Quarterly change in % | |||||||||||
| Austria | 2,4 | 3,9 | 1,3 | 3,6 | 3,0 | 1,7 | 0,8 | -0,4 | 1,2 | x | x |
| Austria excl. Vienna | 2,7 | 4,6 | 1,5 | 3,5 | 3,8 | 1,5 | 0,6 | 0,8 | -0,0 | x | x |
| Vienna | 2,2 | 3,3 | 1,1 | 3,7 | 2,4 | 1,9 | 1,0 | -1,2 | 2,2 | x | x |
| Index (2000=100) | |||||||||||
| Austria | 245,3 | 239,4 | 230,4 | 227,5 | 219,5 | 213,1 | 209,5 | 207,8 | 208,6 | 222,6 | 208,0 |
| Austria excl. Vienna | 233,3 | 227,3 | 217,2 | 214,1 | 206,9 | 199,3 | 196,3 | 195,2 | 193,7 | 209,4 | 194,8 |
| Vienna | 283,0 | 276,8 | 268,0 | 265,1 | 255,6 | 249,5 | 244,9 | 242,4 | 245,4 | 259,6 | 243,2 |
| Source: Data Science Service GmbH (DSS), Vienna University of Technology, Prof. Feilmayr, OeNB. | |||||||||||
Growth of residential property prices decelerated in Central, Eastern and Southeastern Europe overall but continued to be brisk in some countries of the region
In the first quarter of 2021, GDP-weighted growth of residential property prices in CESEE overall slowed year on year, reaching 6.3%, which was almost on a par with the EU average. Yet, in some CESEE countries, prices still continued to grow at a very fast pace, with demand for residential property remaining high even though housing affordability worsened somewhat.
Housing demand in CESEE countries was fueled by low interest rates, expectations for rising prices, higher savings in view of consumption constraints and a simultaneous lack of alternative investment options as well as people seeking to improve their housing situation to accommodate changing needs, e.g. in the context of remote work. In some countries, such as Hungary and Croatia, demand got another boost from government housing subsidy schemes.
Housing supply has clearly recovered even though the construction industry faces increasing shortages in terms of both materials and labor. In some countries, this is driving up residential property prices and stunting housing supply.
The largely unbroken growth streak of residential property markets in most CESEE countries prompted several central banks in the region to raise awareness of potential risks to financial stability arising from residential property markets.