Market Development in 2022/23
Rising interest rates, tougher times
The lengthy upward trend on the investment property market was interrupted by the sharp trend reversal in interest rates. In this increasingly difficult environment, prices declined in part for the first time in more than ten years.
The investment property market in Vienna was faced with difficult dynamics in 2022 and the first half of 2023: a weak economy, the decline in potential condominium buyers that followed the massive tightening of financing requirements for private apartment purchases, an expected increa- se in investments to meet the future ESG taxonomy criteria and, above all, the fundamental change in the ECB’s interest rate policy which drove finan- cing costs and the yield expectations of potential buyers to new heights. In contrast to the various crises in earlier years – key word: COVID-19 – this time, the market was able to digest this combination of negative factors without a loss. A comparison of 2021 with the second half of 2022 shows price declines of five to 15 per cent on average, whereby the mark-downs in weaker areas were substantially higher than at good or very good locations. The first months of 2023 brought a continuation, but in somewhat weaker form, of this downward trend. The price consolidation was accompanied by a slight decline in the transaction volume. It was, however, not fully reflected in the data for 2022 – the transaction volume declined to EUR 2.2 billion (minus 8.3 per cent compared with EUR 2.4 billion in 2021), primarily due to the strong beginning in that year. The absence of a year-end rally similar to 2021 is particularly remarkable and led to a change in the transaction volume. This trend has continued
into 2023 and, from today’s point of view, is expec- ted to result in a substantially lower transaction volume. It should be no surprise that high-equity private investors and private foundations dominate the buyer side. Numerous institutional investors are restructuring their portfolios and are prepared to divest very good assets. Their new targets consist primarily of developed and extensively moder- nised properties. “Opportunities“, in particular loft extensions, are only included as part of the purchase price at very attractive micro-locations or large-scale expansion projects due to the high construction costs. Of special note is the interim shift in market activity from the centre towards the periphery: The previously dominant 1st District recorded a massive drop of 45 per cent in volu- me, and the combined transaction volume of the outlying districts (1100+) has come to match the centrally located districts (1010 to 1090) – but this situation is expected to change during the course of 2023.
Purchase prices in EUR/sqm n 8,000–14,000 n 4,000–7,800 n 2,300–6,100 n 2,000–4,500
Source: EHL Market Research | Q2 2023
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