New prospects for an investment classic
After many years of largely stable monetary values, the role of real estate as an optimal inflation hedge is being rediscovered. After the restraint following the interest rate shock in 2022, this has now become an important motive for security-oriented and long-term private investors to invest in investment apartments again. The comeback of the classic investment property is therefore anything but surprising and the opportunities that are opening up for investors far outweigh the risks: Higher yields, indexation of rents has become more important and the decline in housing production means stable tenant
demand for investment property buyers. The current situation should therefore be seen as a window of opportunity for private investors who are primarily looking to invest equity. The affordable housing segment remains particu- larly attractive. The new economic situation is leading to an increase in demand for more cost-efficient rental apartments. This also applies to rental apartments with more than two rooms, which are gaining in importance, especially with compact floor plans.
Improved returns
Decreasing vacancy risk
In Austria‘s major cities, rents rose significantly faster than purchase prices in 2022 and 2023. This enables noticeably higher initial yields, even in good locations, which are also rising faster than in the past due to high inflation.
Due to the decline in the production of new space that has already occurred, and consequently in the forecast com- pletion figures for 2024 and 2025, a significant decline in supply is also to be expected on the strongest investment housing markets such as Vienna, Graz, and Linz. The result is significantly improved letting opportunities. Vacancy rates are falling steadily and the periods without income when tenants change are also becoming noticeably shorter.
Indexing
The increase in income due to indexation with the CPI is currently significantly stronger than in the past and will remain so for some time to come. This effect largely compensates for the disadvantage on the financing side.
New build scores with climate friendliness
The climate crisis and the associated pressure on investors to make sustainable investments in existing properties is also indirectly favoring investments in climate-efficient new construction projects.
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