Hardly any sales anymore – housing shortage: “New construction market in Austria is dead”

“The new construction market is currently dead,” says Gerald Gollenz, chairman of the real estate association. Virtually no apartments are sold anymore. The forecast for 2025 is getting worse every day. “We are already talking about at least 80 percent of new construction production,” says the expert. This would also have a huge impact on the entire economy and workers – from large companies to domestic workers. More and more construction workers now have to ‘clock in’ during the warm season, something that has never happened before. In addition, a housing shortage is expected throughout Austria.

Facilitated lending from July 1
For months, the real estate sector has blamed KIM regulations and the Financial Market Authority’s (FMA) stricter lending rules as one of the reasons for the decline in apartment sales. There will be relief on this front from 1 July 2024, because the rules for exceptional quotas, where not all provisions have to be met, have been simplified.

Borrowers must still meet certain requirements. When taking out loans, the equity share was at least 20 percent. In addition, home loans may not last longer than 35 years and the repayment percentage may not exceed 40 percent of the disposable net household income. 20 percent of the new customer volume may deviate from this. However, this variant has not yet been used due to the complex regulations.

Bad mood in the market
But there is also the bad mood on the market: because it is constantly said that no one can afford real estate anymore, many people do not even ask for a loan, said Michael Pisecky, chairman of the Vienna trade group. His colleague from Lower Austria, Johannes Wild, knows real estate agents and project developers who sold the last property nine months ago.

Many real estate developers came under pressure last year after a years-long boom due to sharp increases in construction costs and interest rates. Medium-sized companies have been particularly hard hit and some have gone bankrupt. In addition to the bankruptcies, the question is also what will happen to the unfinished apartments. Real estate spokesperson Hans Jörg Ulreich assumes that projects that are almost completed will also be delivered. The banks also know that nothing is worth less than a half-finished building site.

Ulreich reported that not only apartment buyers are finding it increasingly difficult to obtain loans, but also property developers. It recently took him eight months instead of the usual three weeks to get the financing. He criticized the FMA, saying young WU graduates were threatening bank managers with background checks. He called on FMA boss Helmut Ettl to “turn on your brains and scrap the KIM regulations”.

The government’s economic stimulus package lacks details
Another point of criticism: parts of the announced construction stimulus package are not working. For example, there are open questions about state-subsidized loans of up to 200,000 euros, for which no market interest rate of more than 4 percent, but only 1.5 percent, may apply. It is not yet clear who is entitled to the cheaper money. Many young families are therefore waiting to realize their dream: owning their own home.

Rental apartments are more popular and sometimes more expensive
Because fewer and fewer people can afford real estate, rental apartments are in increasing demand and are sometimes more expensive on the open market. Experts believe that a rent ceiling would not improve anything for certain population groups. Due to the high demand, landlords were able to choose their tenants themselves. “People with high incomes are winning the race because landlords want certainty,” Pisecky is convinced.

Gollenz emphasized that it was just a matter of limiting the damage. “If we act now, the bottom won’t be as deep and the recovery will happen faster.” The representatives of the sector therefore want to increase the pressure at the beginning of July with a new demand document.