Residential property prices in Austria continue to rise in early 2022
(, Wien)The growth of residential property prices in Austria has accelerated further – this was recently confirmed by the Oesterreichische Nationalbank (OeNB) in its Property Market Review Q2/22. The steep upward trend in residential property prices observed in Austria since the second half of 2020, has continued unabated, with price growth remaining above 10% year on year for the sixth quarter in a row both in- and outside Vienna. In Vienna, property prices increased by 11.8% in the first quarter of 2022, and prices in the other provinces rose by 12.9% (both in year-on-year terms). For Austria as a whole, annual price growth edged down to 12.3% in the first quarter of 2022, following 12.6% in the fourth quarter of 2021.
In quarter-on-quarter terms price growth began to accelerate again: Having reached 2.4% in the third quarter of 2021, quarterly growth for Austria as a whole increased to 3.2% in the fourth quarter of 2021 and 3.7% in the first quarter of 2022 (see table 1). For Austria’s provinces excluding Vienna, quarterly growth figures increased strongly to stand at 4.4% in the fourth quarter of 2021, up from 1.5% in the preceding quarter, before decreasing slightly to 3.7% in the first quarter of this year.
| Q1 22 | Q4 21 | Q3 21 | Q2 21 | Q1 21 | Q4 20 | Q3 20 | Q2 20 | Q1 20 | Q4 19 | 2021 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual change in % | ||||||||||||
| Austria | 12.3 | 12.6 | 10.4 | 11.7 | 12.3 | 10.0 | 9.5 | 5.2 | 3.4 | 3.0 | 11.8 | 7.0 |
| Austria excl. Vienna | 12.9 | 13.9 | 10.6 | 12.8 | 14.9 | 10.7 | 9.7 | 6.8 | 2.8 | 1.2 | 12.8 | 7.5 |
| Vienna | 11.8 | 11.3 | 10.2 | 10.7 | 10.9 | 9.4 | 9.4 | 4.1 | 3.9 | 4.3 | 10.8 | 6.7 |
| Quarterly change in % | ||||||||||||
| Austria | 3.7 | 3.2 | 2.4 | 2.4 | 3.9 | 1.3 | 3.6 | 3.0 | 1.7 | 0.8 | x | x |
| Austria excl. Vienna | 3.7 | 4.4 | 1.5 | 2.7 | 4.6 | 1.5 | 3.5 | 3.8 | 1.5 | 0.6 | x | x |
| Vienna | 3.8 | 2.1 | 3.3 | 2.2 | 3.3 | 1.1 | 3.7 | 2.4 | 1.9 | 1.0 | x | x |
| Index (2000=100) | ||||||||||||
| Austria | 269.0 | 259.3 | 251.2 | 245.3 | 239.4 | 230.4 | 227.5 | 219.5 | 213.1 | 209.5 | 248.8 | 222.6 |
| Austria excl. Vienna | 256.5 | 247.4 | 236.9 | 233.3 | 227.3 | 217.2 | 214.1 | 206.9 | 199.3 | 196.3 | 236.2 | 209.4 |
| Vienna | 309.6 | 298.4 | 292.2 | 283.0 | 276.8 | 268.0 | 265.1 | 255.6 | 249.5 | 244.9 | 287.6 | 259.6 |
| Source: Data Science Service GmbH (DSS), Vienna University of Technology, Prof. Feilmayr, OeNB. | ||||||||||||
OeNB indicator suggests that prices are increasingly deviating from fundamentals
The OeNB’s fundamentals indicator for residential property prices in Austria rose significantly in the first quarter of 2022. At 35%, the indicator was up 5 percentage points on the previous quarter. Such a sharp increase has not been seen since the start of the series in 1989. The indicator for Vienna amounted to 40% in the first quarter of 2022. These indicator readings signal that the gap between residential property price growth and the factors captured by the OeNB’s fundamentals indicator has been widening substantially in recent quarters, pointing to increasing signs of overheating in Austria’s residential property market.
Boom in housing construction will peter out
The boom in housing construction, which has prevailed in recent years, is gradually subsiding. In 2021, the number of housing completions progressed to a new high, surpassing the peaks recorded in 2019 and 2020. From 2022 onward, the number of housing completions is expected to decrease. Given still brisk residential construction activity, in conjunction with declining population growth, the number of housing completions across the country will exceed demand by almost 30,000 homes in 2022. As a result, demand is likely to soften; considering this as well as construction materials shortages and potential interest rate increases, we expect that the boom in housing construction will subside further.
Housing loans to households record persistent growth
The growth of housing loans to households continued to accelerate slightly in the first months of 2022, coming to 7.2% year on year in March 2022. At 1.27%, average interest rates on euro-denominated housing loans were 9 basis points higher in March 2022 than one year ago, but still remained below the levels that had been observed before the onset of the pandemic. Housing loans to households continue to carry sizable interest rate risk, with variable rate loans still accounting for more than one-third in new loans.