Real Estate Market 2023: Slowdown and Uncertainty Despite High Demand

In 2023, the real estate price index of the Professional Association of Real Estate and Asset Trustees of the WKÖ shows a noticeable weakening of the ongoing price increases in the Austrian real estate market. Factors such as inflation, higher interest rates, stricter lending practices and rising energy costs are causing uncertainty in the industry and among the public.

Although there continues to be high demand from private and commercial investors, many buyers and sellers tend to postpone decisions. Real estate agents report a stable order situation; however, closings are often delayed because market participants are waiting to see how prices develop.

Professional Association Chairman Gerald Gollenz forecasts largely stagnating residential property market prices for the current year. A price decline or price collapse is, however, unlikely. Declining demand is meeting a tight supply, driven by slowed construction activity among project developers. This is leading to a shortage of housing in the coming years.

Since July 2022, stricter regulations for real estate financing have been in effect under the Credit Institutions Real Estate Financing Measures Ordinance (KIM-Verordnung). As of 1 April 2023, relaxations were introduced, particularly for pre- and interim financing. The effects on demand and purchase closings are not expected to become apparent until summer or autumn.

With the introduction of the commissioning principle on 1 July 2023, the market will change, though not necessarily for the better. The financial relief for tenants is minimal, while they simultaneously lose access to advisory services. Experts fear negative consequences such as lack of transparency, key money abuse, supply shortages or mass viewings.

Overall, the future of the real estate market is uncertain. Professional Association Chairman Gollenz suspects, however, that a lower utilisation of construction companies in the second half of 2023 could stimulate residential construction once again.

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