EHL Investment property report 2025 | Vienna

Report 2025 | Vienna

We stand for real estate.

Investment Property Report

Preface

The sentiment – in other words, the prevailing mood – on relevant investment markets is regularly at odds with the rational analyses of opportunities and risks. This difference is, generally speaking, particu- larly evident at the end of a market cycle: Upward phases are dominated by excite- ment over potential profits, and the partly inflated entry prices are ignored. Downward phases, in contrast, are dominated by pessimism, and attractive opportunities frequently remain unnoticed. Vienna’s investment property market currently appears to be approaching the end of a downward cycle. After roughly three years of painful price declines for many market participants, square metre prices have again reached a level last seen more than ten years ago. The yield curve has risen in step with interest rates – and the rate cuts implemented by the ECB since last autumn have not yet triggered a yield compression. Yields currently reflect the summer 2024 level. One development is, however, evident: The rising interest rates which were primarily responsible for price declines have already

peaked. Key rates have been trending downward for nine months, and the tense situation surrounding other relevant pricing indicators like economic growth and inflation is also easing. A rational analysis of the relevant param- eters and the capital market environment definitely points to a near-term rebound of the Vienna investment property market. It is difficult to forecast whether prices will in- crease slightly or continue to decline in the coming months – but one thing is certain: The current, comparatively attractive price level offers opportunities for long-term value appreciation and interesting yields. Today’s challenging operating environment has led to considerable pressure in many areas. Investors with sufficient equity and liquidity who take an anticyclical approach can find opportunities that will presumably only reappear in the next cycle. Our experienced experts in the EHL investment property team can help you locate the real estate that perfectly matches your investment strategy.

Yours,

Michael Ehlmaier

Vienna | 2025

The EHL Investment Property Specialists: Commitment and Expertise

The know-how of one of the leading real estate service providers in market research, property appraisal, development, consulting and apartment rentals gives you the perfect support for your investment property.

Franz Pöltl FRICS

Markus Mendel MRICS

Herwig M. Peham MRICS

Managing Partner EHL Investment Consulting GmbH

Managing Director EHL Investment Consulting GmbH

Head of Investment EHL Investment Consulting GmbH

Thomas Stix

Karina Schunker MRICS

Stefan Wernhart MRICS

Senior Consultant EHL Investment Consulting GmbH

Managing Director EHL Wohnen GmbH

Managing Director EHL Gewerbeimmobilien GmbH

Investment Property Report

Contents Preface............................................................................Pg. 03 EHL Investment Property Specialists................................Pg. 04 Market Development in 2025/26.....................................Pg. 06 The Economic Environment..............................................Pg. 08 Market Trends..................................................................Pg. 10 Parification......................................................................Pg. 12 Alternative Business Models............................................Pg. 14 The Housing Market.........................................................Pg. 16 Appraisals........................................................................Pg. 18 The Legal Environment.....................................................Pg. 20 ESG an Energy supply.......................................................Pg. 22 Round table - Hospitality..................................................Pg. 24 References.......................................................................Pg. 28

Overview of Vienna’s Districts

Daniela Logar

1. District Inner City.........................................................Pg. 30 2. | 20. District Leopoldstadt | Brigittenau.........................Pg. 32 3. District Landstrasse.....................................................Pg. 34 4. District Wieden.............................................................Pg. 36 5. District Margareten......................................................Pg. 38 6. District Mariahilf...........................................................Pg. 40 7. District Neubau............................................................Pg. 42 8. District Josefstadt........................................................Pg. 44 9. District Alsergrund.......................................................Pg. 46 10. | 11. District Favoriten | Simmering..............................Pg. 48 12. District Meidling.........................................................Pg. 50 13. | 23. District Hietzing | Liesing.....................................Pg. 52 14. District Penzing..........................................................Pg. 54 15. District Rudolfsheim-Fünfhaus....................................Pg. 56 16. | 17. District Ottakring | Hernals..................................Pg. 58 18. | 19. District Währing | Döbling....................................Pg. 60 21. | 22. District Floridsdorf | Donaustadt.........................Pg. 62

Senior Consultant EHL Investment Consulting GmbH

Astrid Grantner-Fuchs MRICS

Managing Director EHL Immobilien Bewertung GmbH

Vienna | 2025

Market Development in 2025/26

Investment properties on hold

Transactions on the Vienna investment property market fell visibly short of expectations during 2024 and the first months of this year. With a total volume of only 1.10 billion Euros –roughly 1.01 billion Euros for entire properties and 90 billion Euros for investment property shares – the previous year marked the lowest level in nearly a decade. It also represents a

Price declines in the 1st District were limited to 10 to 15 per cent on average. For larger properties like the Renngasse from the portfolio of the bankrupt Signa Group, plenty of interested buyers are still prepared to pay acceptable prices.

frequently risen up to four per cent or even higher in districts outside the beltway. In the outlying districts (apart from the popular green areas and attractive micro-locations), yields currently reach five per cent or more. Transactions with six per cent yields have also been concluded when location factors are negative and/or the building substance is in poor condition. This development has, in total, led to a stronger differentiation between locations and submarkets. Compared with the boom phases when top prices were also realised in remote areas, the price differences between good and average locations have increased significantly. In other words, this gap reflects the different scope of risks and potential for value appreciation in these submarkets.

Prices in the prime central locations have remained considerably more stable than the market average.

decline of more than 60 per cent compared with the record set in 2021.

All the same, volume develop- ments show a slight easing. The year-on- year decline slowed considerably to less than ten per cent in 2024, and the second six months actually brought an increase after the first visible signs of a gradual decline in interest rates. There are, however, no indications of a recovery in prices. Square metre prices remain under pressure and a turnaround is not yet in sight. The prices for investment properties have not remained stable in any of the Vienna districts during the past three years. The declines vary widely but the general rule shows that the better the location, the lower the price declines. A comparison of the Vienna districts shows – and this is hardly surprising – the best performance in the Inner City.

The declines become stronger compared to pre-2022 prices as the distance to the city centre increases. Attractive locations between the beltway and ring road generally see reductions of 20 to 30 per cent, while average to weaker locations in the outlying districts are confronted with a minus of up to 50 per cent in extreme cases or even higher in exceptional situations. Furthermore, these submarkets are currently very illiquid. Sales outside the beltway often take quite long to complete, independent of the price. The price declines have led to a significant increase in yields. They are still compar- atively low at 2.25 to 2.5 per cent at top locations in the 1st District, but have

Investment Property Report

Transaction volume in EUR million Investment properties + investment property shares

2,500

2,000

2,400

2,200

1,500

1,750

1,650

1,000

1,400

1,100

950

500

2018

2019

2020

2021

2022

2023

2024

Number of transactions in investment properties

500

400

300

340

333

306

200

267

195

100

155

2024

2018

2019

2020

2021

2022

2023

Number of transactions in investment property shares

500

400

300

200

208

197

192

100

163

148

105

2024 72

2018

2019

2020

2021

2022

2023

The included data are based on transactions recorded in the real estate register up to 2024 (asset deals/share deals). Differences to previous years can result from subsequent registrations.

Vienna | 2025

The Economic Environment

Recession, caution and a lack of drive

Franz Pöltl FRICS

Managing Partner EHL Investment Consulting GmbH

The current economic environment has an extremely negative influence on the real estate market. In Austria, the three-party government coalition recently announced its intention to fight the excessive budget deficit with a sweeping package of cost-cutting measures. This will challenge the country’s economy in the third consec- utive year of recession and in an extremely volatile global climate. Additionally, there are reasons to fear that factors like the Ukraine crisis and the erratic tariff policy of the Trump administration will prevent any rapid economic recovery in Western Europe. The resulting negative effects are noticeable on many levels. The weak economy and uncertain outlook have made consumers nervous and led to a sharp drop in spending which, in turn, has disrupted the retail trade and commercial property market. The outcome has been an increase in vacancies and declining rents for retail space in ground floor zones. This development is evident in major shopping streets like the Mariahilfer Strasse and even stronger in shopping streets with a primarily local focus and lower pedestrian frequency. One factor not to be underestimated involves the consequences for potential investors’ liquidity. Austrian companies

are faced with substantial profit declines and, in many cases, have started to build up high cash reserves as security for potential near-term challenges. The family businesses which were previously among the most active buyers on the investment property market are uneasy, often despite high liquidity buffers, and are taking a wait and see approach to the market instead of buying at conditions that are attractive compared with pre-2022 years. Developments on the financing side remain disappointing. Key interest rates and related reference rates like the Euribor have fallen considerably since mid-2024, but the banks have significantly increased risk premiums, equity requirements, repayments and margins. Consequently, financing costs have not declined as strongly as expected and hopes that the changes in ECB policy would revive the market have (not yet) been fulfilled.

However, interest developments bring a ray of hope for the market. Further cuts in key rates are likely and it can be assumed that these reductions will be passed on to interested buyers in the future through lower interest rates. Another positive factor is the recent stabilisation of rapidly rising building costs. The current low capacity utilisation in the construction and related industries should check the momentum in building price trends.

Purchase prices in EUR/sqm 6,000–10,000 2,000–6,200 1,600–5,800 1,400–3,200

Source: EHL Market Research | Q1 2025 Purchase prices in EUR/sqm

Investment Property Report

Investment property market by buyer

1 %

39 %

60 %

Project developers Foundations & private persons Banks & insurance companies

Investment property market by transaction volume per property

4 %

9 %

28 %

12 %

> 10 M EUR 6-10 M EUR 4-6 M EUR 1-2 M EUR 2-4 M EUR >1 M EUR

27 %

20 %

The included data are based on transactions recorded in the real estate register up to 2024 (asset deals/share deals). Differences to previous years can result from subsequent registrations.

Vienna | 2025

Market Trends

What’s a better time to invest, if not now?

Franz Pöltl FRICS

Managing Partner EHL Investment Consulting GmbH

The pros and cons: The current market distortions create opportunities to locate properties that are not easy to find in normal economic phases. But there is one not-so-small piece of bad news. Only investors with plenty of equity can take advantage of these opportunities.

Applying the old stock market truism – “buy in times of war” – to the real estate market in general and to the investment property market in particular means the time has come to consider new

is not reason enough to buy. Much more important is the decline in purchase prices – meaning in absolute terms – to a very solid level. Particularly worth mentioning

The main reason for this weak momentum is the current lack of sufficient financing. Compared with historical trends, banks are currently requiring comparatively high equity ratios (seldom much lower than 50 per cent) for investment property financ- ing. Experts working with this business model are generally not liquid enough after three extremely challenging years or are holding back because of well-filled project pipelines – and this vacuum will open investment opportunities for other, high net worth investors. However, there is no particular reason to hurry. Banks will be preparing to sell a large number of properties from non-performing loans in the coming 18 months, and this will increase the overall supply. A rapid turnaround in prices can, as a result, not be expected and will presumably lead to attractive opportunities for high net worth buyers up to 2026.

Yields have increased signif- icantly in all submarkets. In many locations, initial yields are again distinctly higher than the yields on ten-year government bonds.

investments. The market was virtually flooded with negative news for the past three years, but prices have now declined and potential buyers can choose from a rich supply of widely different properties.

This estimate may seem risky after three extremely difficult years, but is absolutely justified considering the actual situation. Yields that were more or less neglectable in boom times have risen significantly in all submarkets. In many locations, initial yields are again distinctly higher than the yields on ten-year govern- ment bonds.

is the stability and slight upward trend in the purchase prices for apartments. This development has pushed the difference between the square metre price for entire properties and condominiums in the same building to a historical high. The separation and sale of individual units is currently a very attractive business model, but this obvious fact has not yet revived buyers’ interest.

This may be interesting in its own right but

Investment Property Report

Investment property market yields in the Vienna districts

4 %

3 %

2 %

1 %

0 %

Source: EHL Market Research | Q2 2025

Vienna | 2025

Parification

Last exit sell-off: Opportunities but no simple strategy

Herwig M. Peham MRICS

Head of Investment EHL Investment Consulting GmbH

The (obvious) reaction of many investors and developers to legal intervention in existing rental contracts is to sell when renting becomes more difficult. The optimised sale of an investment property through the marketing of indi- vidual units requires strategic planning and careful imple- mentation.

The suspended indexing of benchmark rents which has appeared under the keyword “rental cap” covers not only municipal and not-for-profit residential

as easy as it might appear at first glance. Expertise, a fair amount of work and, last but not least, a lack of time constraints are required to optimise results.

the form of an advance payment for the cancellation of a valid lease, can be a reasonable solution in other situations. The only remaining possibility is to be patient and postpone the sale indefinitely. Take the right decisions at the right time: The reasonable/necessary measures to increase or preserve the property’s value which require the consent of all or a major- ity of the owners should be completed, if possible, before new owners are involved in voting procedures after the sale of the first apartment(s). Experience has shown that apparently reasonable projects are often difficult to accomplish, which can make the sale of additional apartments more difficult or appreciably reduce realisable prices. Typical examples are the installation of an elevator, approvals for balcony construction, facade refurbish- ment, and the inclusion of a possible loft extension in the utilisable value appraisal.

construction but, above all, the historical stock of investment properties. Following the postponement and subsequent cap of indexing in 2022, this latest legal intervention prevents the adjustment of rents and sustainably damages property rental as a business model. Announcements

The ultimate way out of the jungle created by the Austrian Tenancy Act – and an obvious strategy – is the separation and sale of individual units to owner-occupiers.

by various politicians of further tougher restrictions in the future is also encourag- ing investors to seek alternatives. The ultimate way out of the jungle created by the Austrian Tenancy Act (“Mietrechts- gesetz”) – and an obvious strategy – is the separation and sale of individual units to owner-occupiers. However, this is not

Rented apartments: Apartments with (open-ended) leases are, as a rule, difficult to sell and require sub- stantial price discounts. Terminating the lease is a possibility when an apartment is rented but no longer used as a primary residence by the tenant or other eligible person. An amical solution, generally in

Investment Property Report

Improvement of the common areas: The realisable selling price for condomin- iums is dependent to a significant degree on the building’s overall impression. Common areas like hallways, stairwells and inner courtyards as well as elements like the main entrance should be in good condition before the start of the sale process. The extent of the improvements is heavily dependent on the location – an expensive project that is successful at a prime city centre location can be a less than optimal investment at a weaker location on the outskirts. But it pays off, almost always and every- where, to at least improve the optical impression with a little attention to detail: New lighting, maybe one or the other plant

– these minor upgrades are inexpensive but can make an important contribution to successful sale. Improvement or refurbishment of the apartments: In contrast to the optimisation of the common areas, investments in the improvement of apartments for sale are, in no way, a must. There is a functioning market for extensively refurbished and modernised apartments as well as for slightly out of fashion “DIY projects”. The latter are an interesting option, above all at less prominent locations with lower price levels. Planned investments should, how- ever, also be evaluated at good locations to determine whether potential buyers will be prepared to pay the necessary

higher price. A happy medium would be to prepare a refurbishment and improvement plan, including a realistic time schedule, and to sell the apartment at the buyer’s option: refurbished, partially refurbished or not refurbished.

Vienna | 2025

Alternative Business Models

Housing is not the only answer…

Herwig M. Peham MRICS

Head of Investment EHL Investment Consulting GmbH

EHL investment property specialist Herwig M. Peham on the underestimated flexibility of an investment property, alternatives to conventional residential, office and com- mercial use as well as promising strategies in a difficult legal and political environment.

Mr Peham: When the famous “rental cap“ was passed in an already difficult market phase, didn’t you wish you weren’t working as an investment property broker? Herwig M. Peham: Not really. That was definitely not good news for the market, but you have to take the legal and political environment as it is. When operating conditions change, you need to act professionally, change your strategies and develop new solutions.

at the city’s history: So many properties that were originally used for industrial or technical purposes were transformed into offices and only later converted into apartment buildings.

together with the experts at our roundtable discussion.

Where do you see other possibilities?

Peham: Healthcare still receives too little attention. There is also a full range of possibilities in this area. Government

OK, but what does that tell us for the future?

Peham: That the evaluation of alternatives to the current use is an excellent idea. New demands arise, and they form the basis for new opportunities. A good – and probably the most

Healthcare still receives too little attention. There is also a full range of possibilities in this area.

That sounds very theoretical – but an invest- ment property is an investment property…

important – example today is the hospitality area. It is, at the very least, an option for many properties and locations, simply because of the great variety: from hotels to serviced apartments, long-term rentals or daily short-term stays. Of course, specific technical expertise is needed to substan- tially increase the earnings and value of an investment property. But the potential is a subject I was able to examine more closely

Peham: And that is a very limited view- point, but not quite surprising because the flexibility of investment properties is normally underestimated. Naturally, the possibilities to modify the “hardware“, in other words the building substance, are limited, but the materialisation, meaning how the property is used, is not irrevers- ible. You can also see this when you look

programmes to increase the supply of registered doctors’ practices will lead to an additional demand for office facilities, and other related professionals, for example physiotherapists, will also need more space in the future. It is always particu- larly interesting when several healthcare practices locate in the same building – they

Investment Property Report

can share the reception infrastructure and patients benefit from the close proximity of different services. We have also recently seen an increase in customers looking for properties that are suitable for assisted living. This is certainly not easy but, given demographic develop- ments, will be a rapidly growing segment. What are the alternatives for investment properties when the structure or location are only suitable for housing? Peham: When we decide on, or are limited to, housing as the only use for a property, yields are restricted by the benchmark rent system.

properties that require improvement are also attractive for construction syndicates that previously focused on new construction. These companies can cover a larger part of the adaptation costs in existing buildings internally through their own services, and the syndicate members are generally looking for urban locations. In view of the ecological standards which often have high priority for construction companies, a new use for an existing property is also clearly preferable because there is no additional ground sealing and resource consumption is lower than with new construction.

The separation and sale of individual apartments is, without a doubt, a logical but not the only alternative to conventional rental.

As long as apartments with a maximum of 130 sqm are involved, there is no alternative. The separation and sale of individual units is, undoubtedly, a logical but not the only alter- native to conventional renting.

The value-creating innovation here is not structural modification but new usage strategies. We have recently been looking for invest- ment properties in attractive locations that are suitable for a family with several households – children, grandchildren or close relatives – who want to purchase, adapt and use the building together. This is a very exciting idea and, especially because the prices for entire buildings and individual apartments are so different, it has a distinctive economic logic for the buyer. This model can also be very interesting for investment properties. On the one hand, there are enough ethnic communities which place great value on the extended family and need a large number of residen- tial units. On the other hand, investment

I don’t want to say is that alternative uses are a cure-all. However, there are definitely more possibilities than rental at benchmark prices or separation and sale. It’s a good idea to evaluate other options and when a company like EHL is professionally involved with investment properties on a daily basis, there are always new ideas and concepts to better use the available economic opportunities.

Vienna | 2025

The Housing Market

Good earnings poten- tial, also for the sale of individual apartments

Karina Schunker MRICS

Managing Director EHL Wohnen GmbH

The substantial decline in new construction and renewed buyer interest create good earnings opportunities for investment property owners and a further attractive exit scenario as an alternative to a complete sale.

Developments on the housing market currently offer particularly attractive opportunities, also for investment prop- erties. Investor interest in the purchase of entire buildings is slowly recovering, but the demand for apartments is again approaching earlier record levels. In the most important submarkets, the prices for the sale of individual units have remained stable in recent years. Good locations with an especially short supply have also seen above-average value growth.

latest in 2026, where demand substantially exceeds the supply of new space.

when the building substance is very good. If open spaces or perhaps an underground garage are also available, the prices for these older apartments can be even higher than newly built apartments at comparable locations because the typical advantages of Wilhelminian era buildings – high ceilings, elegant interior fittings, historical facades – become increasingly important factors in pricing. In addition to renting, the separation of apartments for the subsequent sale of individual units is an interesting alternative exit strategy für investment property own- ers. New rentals should, however, include and establish the necessary requirements through limited lease terms. The conditions for apartment sales will be very favourable in the coming years due to the expected supply shortage and, above all in popular residential locations, also represent a profitable business model.

The scarce supply in the new construction segment has had a particularly strong impact on the investment property market. This is a consequence of the sharp

In the most important submarkets, the prices for the sale of individual units have remained stable in recent years.“

The upward trend in ownership underscores the general decline in the supply of apartments from the many older buildings which were refurbished and renovated prior to 2022. The decline in building permits and the limited number of refurbishment projects have been reflected in a drastic reduction in the number of completions, while lower interest rates have made apartment purchases more attractive for owner-occupiers. These developments will lead to a situation, at the

drop in completions at central locations where most of the buildings from the late Wilhelminian period are located. Potential buyers looking for properties within the beltway or in good residential areas in the western districts will currently find only a single new construction project. As a result, the previous substantial price dif- ference between first-time occupancy and refurbished older apartments has become much smaller – and trends towards zero

Investment Property Report

50,504

Completed flats vs. population growth

20,000

20,284

19,435

18,022

15,645

15,000

16,309

14,253

12,183

5,081

10,080

5,580

10,000

300

4,084

8,010

4,795

5,998

3,647

5,000

5,362

4,302

2,369

1,878

4,566

3,797

3,311

2,916

2,485

2022

2023

2024

2025*

2026**

Rent subsidised

Rent privately financed

Ownership

Source: EHL/Exploreal, 07 2025 | City of Vienna, 11 2023 *Forecast, **Currently known Fluctuation margin

Population growth

Residential value instead of square metres The positive development of the housing market is also reflected in the square metre prices for condominiums, a situa- tion that opens interesting opportunities for investors. The substantial gap in

residences that optimally meet the needs of the market and, in this way, emphasise the benefits and increase the attractive- ness of apartments in older buildings. Open spaces play a central role here. Pri- vate outside areas like a balcony or ter- race have become a key decision factor for many buyers. Above all in streets with reduced traffic and green areas, balco- nies are associated with high quality and comfort. Building permits for balconies are now easier to receive than in earlier years, at least outside particularly sensi- tive historical protected zones. Just as important but frequently ignored is the optimisation of the apartment layout. The room partitioning can also be

modified in Wilhelminian era buildings and, in many cases, relatively manage- able structural changes can produce a configuration that meets today’s housing demands. The combination or separation of several apartments also provides attractive opportunities for sale in many cases. The inclusion of these two points in the marketing strategy will make it virtually impossible to find an investment proper- ty with apartments that are impossible to sell at very favourable prices. Other factors like garage parking, new heating systems, elevators etc. are, as a rule, positively received by potential buyers but seldom the decisive factors for a purchase.

realisable square metre prices between entire properties and high-quality con- dominiums in investment properties has led many investors to search for suitable buildings with vacancies for their “reno- vate, separate and sell” business model. However, cost-intensive investments are generally required to produce the quality demanded by the market. A wide range of individual measures are, in fact, required and can be summarised under one basic principle: The goal is not to sell square metres but to develop

Vienna | 2025

Appraisal

Yield beats square metre price, but not always

Astrid Grantner-Fuchs MRICS

Managing Director EHL Immobilien Bewertung GmbH

In difficult market phases, the direct and secure earning power of a property is also a key factor for valuation. Prospects for value appreciation are, however, becoming increasingly important for investment properties, especially at above-average locations.

In theory, the valuation of a property, e.g. an investment property, appears to be rather simple: You look for a similar prop- erty that recently changed hands at a real market price, make a few adjustments for the different location and technical quality, and the value is calculated in no time.

depending on the market situation. That means the relevance of the indicators “yield“ and “square metre price” can be different – as an example – in 2025 com- pared to 2021 and also have a different meaning in Simmering and the Inner City.

Prices in weaker locations are still yield-driven, similar to the situation since the end of 2022. This is only logical because yields become dominant in difficult market phases when prices can also decline. The underlying reason here is the secured cash flow that makes financing possible and motivates buyers to take on risk and enter the market despite a challenging and uncertain environment. As seen from the valuation viewpoint, the yield dominance will continue in average and below-average locations for the foreseeable future. The defining factors currently also include a growing shift in bank policies in favour of a sale. More products will therefore enter the market in this segment and short-term price increases will be very unlikely (which makes it important to focus not only on the rental yield).

The current valuation of Investment properties in Vienna reflects the mar- ket’s uncertainty.

Comparative values, in other words market monitoring and analysis, form the basis of any valuation. However, apart from the complex methodology that makes different properties comparable, the basic question is what aspects to include

in the calculation. Is it the generated cash flow which is used to determine the yield and earning power of the property? Or is it the purchase price per square metre that reflects the substance value including expectations for future value development (key word: concrete gold)? This question must be answered differently

The current valuation of investment properties in Vienna reflects the market’s uncertainty – conditions are difficult at the present time but positive aspects point to a bottoming out in prices and the basis of a turnaround.

Investment Property Report

Yields have still not recovered The yield represents a decisive criterion for the valuation of a property under all income approaches. In spring 2025, the market yields at prime locations in the 1st District ranged from 2.25 to 2.5 percent and reached three per cent at good locations within the beltway. Peripheral and less attrac- tive locations, in contrast, produced

values up to five per cent. A remarkable fact is that yields have not declined nota- bly since 2024 even though key interest rates, bond yields and refence rates like the Euribor have fallen substantially over the past 12 months. This is chiefly a result of the banks’ refusal to pass on even a limited share of these reductions to their customers

because of increasing risk premiums and margins. However, a continuation of the downward trend in interest rates can also be expected to trigger a decline in market yields over the coming months and, in turn, will be included in valua- tions.

The situation at above-average locations is somewhat different: In good locations, the square metre price is the focal point of attention. This can be interpreted as a

want to build up attractive portfolios. For these potential buyers, the current market situation is an excellent entry opportunity.

criterion in the Inner City. The same also applies to micro-locations in more outlying areas like Währing or Döbling. The rental yield, in contrast, will clearly dominate as a comparative criterion at less prestigious locations on the city outskirts.

typical feature of a market in recovery. The fact that yields are no longer the primary or only value-determining criteria in these submarkets is a sign that the low point has passed. The greater attention given to square metre prices in valuation is justified for two reasons in good locations: On the one hand, the sale of

Specifically, this means the following for Vienna: Square metre prices are once again an important criterion for the comparative transactions used to value investment properties at central locations.

condominiums is a realistic business model and lower purchase prices combined with nearly constant selling prices lead to higher margins. On the other hand, these are the preferred investment locations for high net worth companies and family offices that

Specifically, this means the following for Vienna: Square metre prices are once again an important criterion for the comparative transactions used to value investment properties at central locations inside the beltway – and nearly the only

Vienna | 2025

The Legal Environment

Indexing as a legal labyrinth

Inflation adjustments to rents, especially within the scope of application of the Austrian Tenancy Act that applies to investment properties, have become a minefield following recent legal intervention and decisions on association- based legal actions by the Austrian Supreme Court which declared numerous index clauses invalid. Whether the situation is really as bad as it seems is as subject we discussed with Nina Mitterdorfer and Wilfried Seist, two experts in real estate law.

The Austrian Supreme Court has caused great uncertainty with its decision to declare numerous standard index clauses invalid. Is the fog slowly lifting, and just what does this mean for the branch? The situation is still not completely clear, but certain trends in the legal literature are now evident. The first step is to differentiate between the type of legal proceedings for the evaluation of an index clause: A legal action instituted by an association – for example, proceedings initiated by the Association for Consumer Protection against a landlord – involves the application of stricter standards to the wording of an index clause because the interpretation is assumed to take the most consumer-unfriendly approach. In cases where the legal action is lost or a phrase

in a rental agreement fails to meet the Supreme Court’s strict requirements for these types of proceedings, this does not necessarily mean a tenant would also be successful in an individual action against the landlord.

goalkeeper. An individual legal action, in contrast, also considers whether the actual indexing reflects the original intention of the contract parties. If this is correct – which can be expected in many cases – the landlord has a good chance that the clause will be judged effective in the individual proceedings. Here is one example: A contract indicates that indexing is possible for the first time after one year of the contract term. The eagerly awaited initial relevant decision by the Supreme Court on individual proceed- ings indicates that an index clause is also effective when a value adjustment during the first two months after the contract conclusion is not explicitly excluded.

Can you give us an example?

In a legal action instituted by an associa- tion, an index clause that originated prior to the contract conclusion or which does not explicitly exclude the possibility of an increase in the base rent by the landlord during the first two months after the con- tract conclusion is, in any event, invalid. Including this type of clause in a newly concluded contract gives the plaintiff in an association-based legal action the same advantage as a penalty kick without a

Investment Property Report

I n conclusion, one other point because this topic is currently impossible to avoid: What can we expect in the way of legal regula- tions after the rental cap? The government programme for 2025 originally included the announcement of ambitious plans to “clarify“ incorrect or legally defined indexing, which was subsequently termed “legally regulated indexing“. At the moment, politicians are apparently tending more towards the expansion of the rental cap than to clarification – but the exact implementation is still open.

That may seem obvious for laypersons but it is, unfortunately, not – see the above-mentioned Supreme Court deci- sions. Predating the starting point can be effective in individual legal proceedings, for example when current contract practice shows that the indexing was legally com- pliant, e.g. with the contract date as the

agreed contract term. The possible future problems for a potential buyer from a fixed-term contract can be calculated and assessed. Under a worst case scenario, it would involve a “frozen” rent without indexing for a tenant with an uncancellable contract.

starting point. Clauses are, in any case, severable in individual proceedings, which means when one part is declared invalid the remainder of the index clause is still in effect.

Including this type of clause in a newly concluded contract gives the plaintiff in an asso- ciation-based legal action the same advantage as a penalty kick without a goalkeeper.

Could this mean a turnaround?

Turnaround is, perhaps, too optimistic. However, legal

decisions by the appellate courts as well as the Supreme Court point towards a certain course adjustment in the right direction for individual proceedings.

Open-ended rental contracts, in contrast, can only be quantified with a forecast calculation. We can obtain security for the sale in some cases through so-called warranty insurance, which evaluates and subsequently insures the risk of possible invalidity. Here, the insurance covers the seller’s liability. This can represent an interesting solution to make the sale of an investment property possible.

How do you handle this issue during the sale process for an investment property?

The sale prospects for a property with rental contracts that include inadequate index clauses naturally depends on the specific wording of the clause and the

People in conversation

Nina Mitterdorfer

Wilfried Seist

Partner | Attorney at Law DSC Doralt Seist Csoklich Rechtsanwälte GmbH

Vienna | 2025

ESG and Energy supply

Dormant potential: Value appreciation with ESG

Markus Neumayer

Managing Partner/CEO Neumayer Projektmanagement GmbH

In the beginning was the regulation – but the market has since become the motor for improving the sustainability of investment properties. Substantial value appreciation can be realised with customised concepts for ESG investments.

“Turning off the gas“ misses the point The key to a successful ESG strategy is the necessary ranking of possible measures: Where can the greatest improvements be made at comparatively little expense, and what investments really lead to an increase in value? Apart from the fact that every property – especially investment properties – requires individual evaluation and decisions, one thing is clear from the practitioner’s viewpoint: Sustainability issues, headlines and the political discourse dominate, but are only the most important factors in very rare cases. Or to put it differently: “Turning off the gas“ misses the point. Converting the energy source is one project that will never appear in a podium ranking of the most important improvement projects. The top three

There were times when sustainability enjoyed greater popularity than in 2025 – in the real estate sector in general and on the investment property market in particular. The downgrading of legal requirements for the exit from fossil energy carriers in 2040 (and, with the expected extensions, most likely several years later) combined with the difficult market climate have been responsible for a noticeable decline in the importance of greening, taxonomy and ESG with investors and developers. This development is understandable but detrimental, above all from an economic standpoint. Measures to improve sustain- ability – when planned and implemented with expertise – can be highly profitable investments, and investment property owners and developers are well advised to carefully evaluate the ESG potential of their properties.

include, without a doubt, the replacement of windows, facade insulation and the insulation of the top floor ceiling. These improvements can save up to three-fourths of heating requirements and support a similar reduction in operating costs. The conversion of energy sources, for example from gas to an air-water-heat pump or geothermal energy, does not reduce heating requirements, is often unreasona- bly expensive in existing buildings and, in any event, does not lead to an adequate reduction in operating costs. One major argument against sustainability investments in investment properties is the limit on rental prices. All the same, sustainability measures increase the value of a property, have a positive influence on financing costs and, last but not least, ESG alignment has also become a requirement for the unrestricted marketability of real

Investment Property Report

estate. Institutional investors ranging from insurance companies to funds must concentrate their activities on ESG-aligned properties due to the EU Taxonomy Directive, and the absence of this buyer segment has a negative effect on the pric- es other investors are willing to pay. From

the viewpoint of the long-term investor, there are good reasons to remain focused on, or perhaps give greater attention to, sustainability. A carefully prepared ESG timetable and its implementation are an effective approach, even when legal requirements provide the motivation.

Sustainability can also be pretty… Thermal renovation and the preservation of the historical cityscape are in no way a contradiction, they can actually go hand in hand: At Meissnergasse 2 in Vienna’s 22nd District, an investment property

which had lost most of its traditional exterior details was refurbished. The result: a reduction of roughly 65 per cent in heating requirements and a major aes- thetic improvement with the restoration of the historical facade.

Investment property of the 3SI Immogroup, Messnergasse 2 | 1220 Vienna

After: thermally renovated with a restored historical facade

Before: the investment property with a largely bare facade

Sustainability subsidies in Vienna Subsidies from the Austrian federal government are expiring but, from the current point of view, Vienna’s subsidy programme will also continue after 2025. The most important subsidy pro- grammes are:

insulation of the top floor and cellar ceilings. The amount of the subsidy is dependent on the realised savings and up to 120 Euros/sqm of usable space are possible in many cases. Heating system conversion DThe changeover from gas to an air-heat pump is subsidised at 50 Euros/sqm of living space and the conversion to

geothermal energy at 80 Euros/sqm. In addition, a subsidy of 50 Euros/sqm is possible for every apartment connected to a new sustainable heating system. “Hauskunft“, a service of Wohnfonds Wien, Vienna’s municipal fund for resi- dential construction and urban renewal, provides detailed advising on subsidies (www.hauskunft-wien.at).

Thermal renovation The subsidies cover measures like facade insulation, window replacement,

Vienna | 2025

Round table - Hospitality

Higher yields with shorter rentals

It doesn’t always need to be housing. Or office or re- tail. EHL invited leading experts to a roundtable dis- cussion on the rapidly growing “hospitality“ business and how it could become a profitable alternative to other investment property uses.

Mr Peham: Residential use dominates in Vienna‘s investment properties, followed by office and retail space. Why, then, are we talking about the relatively small hospitality business today? Herwig M. Peham: Hospitality is, based on the existing supply of properties, undoubt- edly a comparatively small segment. But considering the transaction volume, in other words the area where changes are coming, the percentage is much higher and, above all, is increasing rapidly. Hotels and other uses linked with hospitality today make up an increasingly impressive share of investment transactions and there are

from political intervention in the much larger residential segment?

added possibilities for growth – also in the investment property segment.

Daniel Jelitzka: There are a number of obvious reasons for this. The most recent is simply the high interest phase that is still not completely over – and continues to drive the search for profitable investments. Included here are special uses that are not often considered like logistics and data centres, but also hospitality which is basically a good match with investment properties. A look at the numbers shows that tourism is currently the absolute super investment vehicle and will still be the most attractive segment for the

Jelitzka: Of course, that also plays a role because the endless discussions over rent caps in Austria is a source of considerable irritation throughout the entire real estate market. Regardless of whether rental prices are limited or inflation adjustments are capped, Austrian as well as internation- al investors are uneasy. And that naturally makes a “flight” into commercial uses – which is the subject of our discussion today – an obvious option. Mr Vollmayr: Tourism, meaning your branch, is the absolute super investment alternative according to Mr Jelitzka. That’s a nice complement, but how do you see the possibilities for investment properties in this area? Are these properties particularly suit- able, comparable for or not as good for the hospitality business as new construction? Josef Vollmayr: I basically agree with Daniel’s market analysis and would like to add a few statistics to support this position. Eight of the ten countries with

next 10 to 15 years. Europe is responsible for roughly half of the 1.5 million hotel overnight stays worldwide. The Continent is, and will remain, the global tourism hotspot and, specifi- cally, nearly 10 per cent of the service sector is connected with tourism – that represents an enormous potential.

But isn’t the real issue the flight

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