Residential property prices in Austria and CESEE continued to soar
(, Wien)The steep upward trend of residential property prices in Austria continued in the first half of 2022. House price growth in Central, Eastern and Southeastern Europe (CESEE) was also striking in late 2021and early 2022, which implies rising financial stability risks. This was recently confirmed by the Oesterreichische Nationalbank (OeNB) in its Property Market Review Q3/22.
Two-digit growth in residential property prices persists
Year-on-year price growth remained above 10% for the seventh quarter in a row − both in Vienna and in the rest of Austria: In the second quarter of 2022, prices rose by around 13% year on year in both regional aggregates. This meant that, for Austria as a whole, house price growth reached a new peak (13.1%, following around 12% at the beginning of the year, see table 1).
| Q2 22 | Q1 22 | Q4 21 | Q3 21 | Q2 21 | Q1 21 | Q4 20 | Q3 20 | Q2 20 | Q1 20 | 2021 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual change in % | ||||||||||||
| Austria | 13.1 | 12.3 | 12.6 | 10.4 | 11.7 | 12.3 | 10.0 | 9.5 | 5.2 | 3.4 | 11.8 | 7.0 |
| Austria excl. Vienna | 13.2 | 12.9 | 13.9 | 10.6 | 12.8 | 14.9 | 10.7 | 9.7 | 6.8 | 2.8 | 12.8 | 7.5 |
| Vienna | 13.0 | 11.8 | 11.3 | 10.2 | 10.7 | 10.9 | 9.4 | 9.4 | 4.1 | 3.9 | 10.8 | 6.7 |
| Quarterly change in % | ||||||||||||
| Austria | 3.2 | 3.7 | 3.2 | 2.4 | 2.4 | 3.9 | 1.3 | 3.6 | 3.0 | 1.7 | x | x |
| Austria excl. Vienna | 3.0 | 3.7 | 4.4 | 1.5 | 2.7 | 4.6 | 1.5 | 3.5 | 3.8 | 1.5 | x | x |
| Vienna | 3.3 | 3.8 | 2.1 | 3.3 | 2.2 | 3.3 | 1.1 | 3.7 | 2.4 | 1.9 | x | x |
| Index (2000=100) | ||||||||||||
| Austria | 277.5 | 269.0 | 259.3 | 251.2 | 245.3 | 239.4 | 230.4 | 227.5 | 219.5 | 213.1 | 248.8 | 222.6 |
| Austria excl. Vienna | 264.3 | 256.5 | 247.4 | 236.9 | 233.3 | 227.3 | 217.2 | 214.1 | 206.9 | 199.3 | 236.2 | 209.4 |
| Vienna | 319.9 | 309.6 | 298.4 | 292.2 | 283.0 | 276.8 | 268.0 | 265.1 | 255.6 | 249.5 | 287.6 | 259.6 |
| Source: Data Science Service GmbH (DSS), Vienna University of Technology, Prof. Feilmayr, OeNB. | ||||||||||||
CESEE house prices accelerated further, and housing markets are facing challenging times
In Central, Eastern and Southeastern Europe (CESEE) house price growth was striking in late 2021 and early 2022 despite the COVID-19 pandemic. New challenges to CESEE housing markets have emerged with the outbreak of the war in Ukraine and financial stability risks have intensified against the background of a long period of extraordinary house price increases, strong housing loan growth and household indebtedness.
Households are likely to be financially more stretched owing to high inflation rates and rising interest rates. Elevated inflation is weighing on households’ purchasing power, which may impair their ability to repay their housing loans. Rising interest rates are affecting the demand for new lending, but moreover, in the case of existing loans with variable interest rates, the costs of repayment are increasing, which might strain households’ debt service capacity.
Housing supply is constrained by skyrocketing construction costs and shortage of labor and construction material. This makes it even harder to narrow the persistent gap between demand and supply in CESEE countries.