financial situation will quickly become unbalan- ced. Most of these properties were not inherited, but acquired and financed, at least in part, with debt. Even with indexing, many investors are fin- ding it difficult to cover the higher interest costs. Many of them wouldn’t survive without indexing, and bankruptcy scenarios could be the result.
That sounds like investment property is more or less a hobby.
Martin Prunbauer, President of the Austrian Building and Landowners Association: It’s a fact that owning an investment property also has emotional aspects for private building owners, and a significant number of these property owners don‘t see this commitment primarily as a way to maximise short-term yields but as a long- term investment in real values for coming genera- tions. But calling this a “hobby“ is, of course, out of the question: An investment property in Vienna has always generated sustainable earnings – at least until now.
Can a one-time indexing suspension really have such dramatic consequences?
Why “at least until now“?
Prunbauer: Any suspension or reduction of indexing would dramatically change the situation. Until the regulations for decarbonisation and, above all, the related financing are clarified, we can’t be sure that investment properties can be sustainably managed in the future. That’s why it was so import- ant to prevent the so-called rental price cap. „ Without indexing, many investors won’t be able to survive. Franz Pöltl “ Kaspar Erath, Chairman of the Association for the Revitalisation and architectonic Upgra- ding of Vienna’s 19th Century Buildings: All this talk isn’t really logical. Indexing must be the normal situation and, at best, can only cover part of the cost increases facing investment property owners. Maintenance costs are rising faster than the CPI, not to mention the soaring interest on debt financing. Franz Pöltl, Managing Partner of EHL Inves- tment Consulting: This is something we need to talk about because the rising costs for loans – interest and principal – must be covered by a corresponding increase in rental income, or the
© Ludwig Schedl
Christine Dornaus is a member of the Managing Board of the Vienna Insurance Group, one of the leading Austrian institutional real estate investors.
Erath: You need to look at the initial position. Even after indexing, the benchmark in Vienna is only 6.67 euros. If I can’t add a mark-up for the location – and that is frequently vetoed with pseudo arguments by the arbitration boards – rental is simply no longer profitable. The only alternative is conversion into tenancies and sale, but then no one should wonder when the supply of rental units is steadily declining and there are
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