Appraisal
Maintenance costs rose by more than 10 per cent from the first to the fourth quarter of 2022 alone. The building owner is responsible for carrying these routine costs, which are then deducted from annual gross revenue. A further challenge can be found in the ever-in- creasing sustainability requirements on buildings, which also cover investment properties. Meeting these requirements will be expensive, but one thing is certain: As long as various issues invol- ving construction and rental regulations remain unanswered, the valuation of the necessary measures is connected with great uncertainty. It is, however, clear that investments in sustainabi- lity measures will ensure a substantial increase in value.
ments at popular locations with appropriate quality.
Gamechangers at a glance The main factors that currently lead to changes in the valuation of investment properties: Rising interest rates: Higher financing costs and yield expectations by potential buyers
High construction costs: Increased maintenance and refurbishment costs
ESG & sustainability: Investments are required, but the legal frame- work unclear Decline in new construction: Better outlook for condominium sales over the medium-term
„Investments in sustainability are a source of value growth “
The above-mentioned higher yield expectations of potential investors lead to lower fair values in all market segments, but the extent of the decline differs widely depending on the quality of the location. Properties within the beltway or traditionally higher quality locations like the 13th, 18th and 19th Districts will, from our viewpoint, be faced with lower yield discounts than other areas in Vienna. A different valuation approach is applied to de- velopment projects where realisation is planned through the sale of condominiums. In these cases, the appraiser usually prepares a project calculation that compares the expected sale pro- ceeds with the total project costs. At this point in time, rising construction and financing costs are contrasted by weaker demand from potential buyers. The development of prices will, therefore, also be highly dependent on location and quality. For development properties, the spread between properties with different location qualities is an even more important factor for valuation: On the one hand, certain projects are impossible to appraise under the prevailing framework condi- tions while, on the other hand, reasonable project results can very well be estimated for develop-
High inflation: Increase in rental income, “devaluation“ of debt
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