Upward trend of residential real estate prices continued in third quarter of 2020

(, Wien)

Price growth driven in particular by single-family homes

According to the most recent property market review of the Oesterreichische Nationalbank (OeNB), the growth of residential property prices in Austria accelerated further across all provinces in the third quarter of 2020, reaching 9.5% after 5.2% in the second quarter. At +9.4%, price growth was similarly strong in Vienna alone (second quarter: +4.1%), in all the remaining provinces taken together, prices rose by 9.7% in the third quarter of 2020 compared with the previous year (after 6.8%). These figures increasingly support the notion that the COVID-19 pandemic and its implications, in particular more working from home, have raised demand for living outside big cities and/or in houses with a garden.

Residential property prices in Austria  
  Q3 20 Q2 20 Q1 20 Q4 19 Q3 19 Q2 19 2019 2018 2017 2016 2015
 
Annual change in %
Austria  9.5  5.2  3.4  3.0  2.3  5.6 3.9 6.9 3.8 7.3 4.1
Austria excl. Vienna  9.7  6.8  2.8  1.2  1.7  3.6  2.6  8.5  4.9  9.1  5.1
Vienna  9.4  4.1  3.9  4.3  2.7  7.0  4.9  5.2  1.5  3.8  2.2
 
Quarterly change in %
Austria  3.6  3.0  1.7  0.8  -0.4   1.2   x   x   x   x   x
Austria excl. Vienna   3.5   3.8  1.5  0.6  0.8   0.0   x   x   x   x   x
Vienna   3.7   2.4  1.9  1.0  -1.2   2.2   x   x   x   x   x
 
Index (2000=100)
Austria  227.5  219.5  213.1  209.5  207.8  208.6  208.0  200.1  187.2  180.4  168.1
Austria excl. Vienna  214.1  206.9  199.3  196.3  195.2  193.7  194.8  189.8  174.9  166.7  152.9
Vienna  265.1  255.6  249.5  244.9  242.4  245.4  234.2  232.0  220.4  217.2  209.2
 

Prices increasingly deviate from fundamentals

For the third quarter of 2020, the OeNB fundamentals indicator for residential property prices for Vienna suggests a +24% deviation of prices from fundamentals; for Austria as a whole, this figure amounted to +17%.

COVID-19 pandemic accelerates cooling of residential construction activity

The COVID-19 pandemic has accelerated the cooling of residential construction activity. The containment measures implemented during the first lockdown in the spring drove down investment in residential construction by 5.5% year on year in the first half of 2020. At the same time, the number of property transactions increased.

Stable growth of housing loans to households

The growth of housing loans to households changed only marginally in the third quarter of 2020, coming to 6.0% year on year in September 2020. At 1.28%, average interest rates on euro-denominated housing loans were 29 basis points lower in September 2020 than one year ago. 

Extent and level of expected price growth differ by household age and education level

In the second and third quarters of 2020, the OeNB conducted a special survey about property price expectations among households in Austria. Respondents were asked about how they think prices for single-family homes, apartments and land will change in their residential area in the coming twelve months and about the level of expected price growth. The survey results show that expectations of increasing prices rise with respondents’ age. While 17% of people under 30 assume that prices will rise, this share almost doubled to 31% among respondents over the age of 60. Also, educational attainment has an impact on price expectations: Among households with a higher level of education, a smaller share of respondents expect prices to remain unchanged, and a higher share anticipate small price increases. Finally, among households living in Vienna, Vorarlberg, Tyrol and Salzburg – regions that have seen above-average price growth in the past – more respondents expect prices to rise significantly than households living in the other provinces.