Low-cost tops in top properties
slightly higher fixed costs in the event of vacancies must be considered, even though these phases are normally short. Transactions and average square metre prices for sold investment apartments (Top 10 districts)
An interesting new investment market has emerged in prime properties that were basically designed for owner-occupiers: In these attractive new residential high-rises like the Marina Tower in Vienna’s second district, the upper, more expen- sive floors are usually purchased for personal use while the lower, less expensive floors are also well suited for rental. Tenant demand has been driven by numerous apartment seekers who are looking to enjoy the amenities and international flair of these proper- ties while remaining flexible without ownership. The yields for the lower cost units in luxury proper- ties like the Marina Tower or The Shore range from 2.0 to 2.7 per cent, but the prospects for value appreciation are above average. However, the
District
Quantity Euro/sqm
14., Penzing
160 139 110
5,547.24 6,440.79 5,935.01 4,866.90 5,300.90 5,487.30 6,778.63 5,959.37 4,793.73 5,319.95
22., Donaustadt 10., Favoriten 12., Meidling 21., Floridsdorf
74 48 43 41 30 26 17
23., Liesing
3., Landstrasse 16., Ottakring 11., Simmering
17., Hernals
Source: IMMOunited | Q4 2022
INVESTMENT KNOW-HOW
Tax benefits but no tax gifts
Meeting these requirements results in twofold benefits for investors: • Deduction of input tax for the VAT included in the purchase price (20 per cent of construction and ancillary costs; the land component is exempt from VAT). • VAT is deductible on all expenses and adver- tising costs connected with the apartment, respectively these costs represent deductions for the calculation of income tax. Ancillary costs consist chiefly of credit interest, maintenance expenses and administrative expenses as well as fees and duties. A rule of thumb: Tax benefits increase in line with the following factors: the construction costs for the apartment as a percentage of the pur- chase price, the share of debt financing, and the investor’s income tax bracket. Financing should be selected to ensure that the total taxable profit will be reached by the end of the monitoring period, or the investment apartment will be classified as a hobby and the tax benefits must be refunded or will not be accepted by the tax authorities.
Investment apartments can bring significant tax benefits – but certain requirements must be met. The following three points are basically necessary to utilise the available tax benefits: • Rental (including VAT) for 20 years. • Taxable profit must be generated within this period (20 years beginning with the start of rental or a maximum of 23 years after the first expenses are incurred). That means the rental income must be higher than all property- related costs (e.g. financing expenses, ongoing maintenance costs, depreciation, administra- tive expenses). Any increase in value from the sale of the apartment must be excluded in the calculation of total taxable profit. • If the property is used by close family members (e.g. children), an “arm’s length“ rent must be calculated and the applicable tax must be paid. A written rental contract is also required.
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