Appraisal
19th Century buildings: Dynamic trends in appraisal
The rapid increase in interest rates, high construction prices and the investments required to improve sustainability have a substantial negative effect on valuation results.
A central task for real estate appraisal is the best possible mapping of the market in valuation results. Appraisers calculate not on the basis of hope, but objectively according to facts. Nevert- heless, the valuations of 19th Century investment properties in Vienna rose steadily to new record highs up to the previous year. This trend came to an abrupt end in mid-2022: A combination of negative factors led to a consider- able decline in valuations during 2023. Although statistics only now point towards a downward trend, the increase in inflation beginning at ye- ar-end 2021 was the first warning signal. The tide then turned completely with the start of the war in Ukraine, supply chain problems, rising const- ruction costs and the continuing cycle of interest hikes by the ECB.
for a major part of the statistical minus.
The lower number of transactions also has con- sequences for valuation procedures. When only a limited number of realised prices for comparable properties are available, financial and business groundwork becomes more important. The income approach is routinely used for existing buildings that are planned as long- term investments. The yield and square metre price are key indicators for the market and also establish the basis for the valuation approach. Rising interest rates have a two-fold effect: on the one hand, through higher financing costs and, on the other hand, in the form of the higher yields expected by potential buyers. Inflation, in turn, leads to value growth through rising income, while higher construction prices have a negative effect through the increase in maintenance and renovation costs.
„The limited number of transactions make valuation more difficult “
The effects are demonstrated most clearly by the decline in transaction statistics. Roughly 90 investment properties or property shares were sold in Vienna during the first quarter of 2022, but the number of transactions dropped by nearly two-thirds to 34 this year. The average square metre price fell by almost 10 per cent year-on-year – with a range of up to minus 30 per cent. However, this situation looks more dramatic than it really is because prime properties are sold much less frequently than buildings at average locations or with other deficiencies – and that is responsible
Astrid Grantner-Fuchs MRICS Managing Director EHL Immobilien Bewertung GmbH Court certified and accredited expert
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