Price data in early 2023 suggest: house price growth in Austria is finally slowing down after two years
(, Wien)Price growth in Austria’s residential real estate sector is finally beginning to decelerate. The steep upward trend in house prices evident since the second half of 2020 started flattening out in the fourth quarter of 2022 – this was just confirmed by the most recent Property Market Review published by the Oesterreichische Nationalbank (OeNB). Year-on-year growth of residential property prices halved in the fourth quarter of 2022, dropping to 4.8% in Vienna (after 9.6% in the third quarter) and 5.6% in Austria excluding Vienna (after 12.0% in the third quarter).
The share of sold properties (relative to supply) visibly declined in the second half of 2022 – both for single-family houses and condominiums. Residential real estate prices in Austria as a whole decreased by 2.0% in the fourth quarter of 2022, following a small plus of 0.3% in the third quarter (both quarter on quarter; table 1). In Austria excluding Vienna, quarterly growth also turned negative, reaching –1.6% in the fourth quarter of 2022, after +4.0% in the third quarter.
| Q4 22 | Q3 22 | Q2 22 | Q1 22 | Q4 21 | Q3 21 | Q2 21 | Q1 21 | 2022 | 2021 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual change in % | |||||||||||
| Austria | 5.2 | 10.8 | 13.1 | 12.3 | 12.6 | 10.4 | 11.7 | 12.3 | 10.3 | 11.8 | 7.0 |
| Austria excluding Vienna | 5.6 | 12.0 | 13.2 | 12.9 | 13.9 | 10.6 | 12.8 | 14.9 | 10.8 | 12.8 | 7.5 |
| Vienna | 4.8 | 9.6 | 13.0 | 11.8 | 11.3 | 10.2 | 10.7 | 10.9 | 9.7 | 10.8 | 6.7 |
| Quarterly change in % | |||||||||||
| Austria | -2.0 | 0.3 | 3.2 | 3.7 | 3.2 | 2.4 | 2.4 | 3.9 | x | x | x |
| Austria excluding Vienna | -1.6 | 4.0 | 3.0 | 3.7 | 4.4 | 1.5 | 2.7 | 4.6 | x | x | x |
| Vienna | -2.4 | 0.2 | 3.3 | 3.8 | 2.1 | 3.3 | 2.2 | 3.3 | x | x | x |
| Index (2000=100) | |||||||||||
| Austria | 272.9 | 278.3 | 277.5 | 269.0 | 259.3 | 251.2 | 245.3 | 239.4 | 274.4 | 248.8 | 222.6 |
| Austria excluding Vienna | 261.2 | 265.4 | 264.3 | 256.5 | 247.4 | 236.9 | 233.3 | 227.3 | 261.9 | 236.2 | 209.4 |
| Vienna | 312.6 | 320.4 | 319.9 | 309.6 | 298.4 | 292.2 | 283.0 | 276.8 | 315.6 | 287.6 | 259.6 |
| Source: DataScience Service GmbH (DSS), Vienna University of Technology, Prof. Feilmayr, OeNB. Note: x = no data available. |
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OeNB fundamentals indicator for residential property prices: gap between prices and fundamentals narrowed in the fourth quarter of 2022
The OeNB fundamentals indicator for residential property prices in Austria came down to 34.2% in the fourth quarter of 2022 (from 37.3% in the third quarter). This indicates that the financial stability risks associated with the real estate market have stopped rising. The decrease in the fundamentals indicator was caused by slightly lower real estate prices than in the previous quarter and, above all, high inflation, which has been pushing down real house prices. The indicator for Vienna amounted to 39.6%, signaling a quarter-on-quarter decline by 3.1 percentage points.
Residential construction activity is cooling off
The buoyant residential construction activity seen in recent years is gradually cooling off. In 2021, the number of newly completed homes reached a new high of 71,200, surpassing the peaks recorded in 2019 and 2020. From 2022 on, this number is expected to come down considerably. Cooling construction activity is mostly attributable to the excess supply of housing that has built up recently and will increase to 50,000 residential units in 2023. What is more, the construction sector is affected by strong increases in construction and land costs, rising interest rates, tighter lending standards and falling real incomes.