On the other hand, waiving the input tax deduc- tion gives buyers greater flexibility, for example through their own use or for rental to family members. A very positive factor from the viewpoint of investors is the tremendous variety of the supply, which reflects a level not seen in other Austrian cities: Investment apartments in well-established locations, like the districts bordering the beltway, are facing increasing competition from properties in the peripheral urban development areas. Prime examples are the regions north of the Danube River in the rapidly growing Donaustadt district and (to a lesser extent) the Liesing and Favoriten districts in the south. The offering of investment apartments in top- quality high-rises, for example the Marina Tower , has become significantly broader. However, poten- tial owner-occupancy is an even stronger criterion
for the buyers at these locations and acquisitions are frequently completed without VAT exemption. Sustainable energy: the benefits of new construction A further plus point for the investment apartments currently entering the market is the focus on and support for the energy transformation. The necessary conversion from fossil to alternative and/or renewable energy carriers in most of the existing buildings will increase the costs for and in older properties and, indirectly, lead to a greater demand for sustainably built apartments. Investment apartment properties with district heating, heat pumps or geothermal heat which, optimally, generate the required electricity with sustainable energy equipment have a special advantage that will also be reflected in better rentability at slightly higher prices. assets is, therefore, an obvious strategy for private investors. Even pure equity financing can provide effective protection for personal assets through the purchase of an investment apartment, and partial debt financing will turn inflation into a yield driver. This is all the more true today because real interest (nominal interest minus inflation) is strongly negative and has fallen to a record low of minus 7.85 per cent (as of November 2022). A generally attractive market environment promises good sustainable yields for investment apartment buyers over the long-term. And even if the investment scene is clouded or complicated over the short-term by a new economic climate with rising interest rates and indexing, an inflation scenario creates an environment that speaks strongly in support of investment apartments. Yields that fail to meet the desired target in the first one or two years are less important when the investment is good and the planned horizon is 20 years or longer.
INVESTMENT KNOW-HOW
Inflation-proof investments Real values – especially real estate – are the classical protection against inflation. High inflation and the accompanying increase in interest rates make financing more difficult and more expensive but significantly improve the yield potential for investment apartments over the long-term. After a longer period of relative stability, inflation started to increase rapidly at the end of 2021 and, in 2022, quickly reached a level last seen nearly ten years ago. This sharp rise in prices is connect- ed with a significant devaluation of monetary assets but also holds a number of advantages from the viewpoint of property investors. The first involves the “deflation“ of debt – specifi- cally, the decline in the value of monetary assets as a result of inflation is accompanied by a decline in the value of financial liabilities, while real assets maintain their real value, even in inflationary phases. The shift from financial assets to real
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