25.06.2013

Investment: Not every property is suitable

  • Due to inflation worries, many Austrians are investing their capital in residential real estate, but not every property is suitable as an investment
  • As a real estate brokerage company, Bank Austria ImmobilienService provided some tips about the things investors and sellers should keep in mind

Suitability for seniors
Austrians – and thus Austrian society – are increasingly ageing: According to Statistics Austria, over 25 percent of the population will be at least 65 years old in 2030. This will impact the residential real estate market in the medium to long term. Penthouse flats without a lift, small bathrooms, tight doorways, lots of stairs: These are all criteria that will make it more difficult to let out a property in the future. "The demand for barrier-free and senior-friendly properties will increase – simply because at some point there will be many more elderly people than young people," says Ludwig Wiesbauer, managing director of Bank Austria ImmobilienService. "The more people can use the property, the bigger the potential pool of tenants is." This doesn't mean you have to rush out and convert everything immediately. "But people should get used to the idea that the requirements for properties will change in line with the demographic shift."

Condition
The structural condition of the property is a decisive criterion for securing earnings over the long term. The state of the roof, facade, windows and sanitation facilities has an important influence on rentability and on future investment costs, which, in turn, reduce the return. "The better the structural condition of the property is, the less you have to worry about high repair and renovation costs," says Wiesbauer. However, there are also problems that the layman might not recognise at first glance, such as pest infestation, mould in the walls or old water pipes. Therefore, it is important to enlist the help of an expert before making a purchase. "This is also applies to sellers, by the way," explains the expert. "Because if owners know about the potential problems of their property from the beginning, they are in a much better position in sales negotiations."

Location
One of the most important things to take into consideration is the location of the property, because it cannot be changed. Therefore, you should not only ensure that the surrounding area has good infrastructure when buying a property, but also that the location offers development potential. "Certain cities will enjoy a strong influx of residents, while the population will thin out in some areas. This has an influence on the long-term rentability." Wiesbauer believes that the already popular cities such as Vienna, Graz and Linz will not be the only ones to benefit from demographic developments, but that smaller towns in the hinterland of major cities will also profit. Because when prices rise, many people will look for affordable living space in these areas. The higher the likelihood of population growth is, the better the chances are that you will always be able to find good tenants. "Therefore, people who live in an area with relatively poor infrastructure should not wait too long to sell, but should take advantage of the current boom," advises the real estate expert Wiesbauer.

Property type
While flats and houses are equally suitable as investments, both have advantages and disadvantages that should be taken into consideration individually before a purchase. If you buy a flat, you are automatically obligated to join an owners' association. This means that major changes such as the renovation of the facade always have to be decided collectively. "This can be very tedious," says Wiesbauer. However, repairs are paid from the maintenance reserve. Homeowners enjoy independence, but a dilapidated roof can quickly become much more expensive for them than for an owners' association that forms monthly reserves. Investors should at least roughly calculate the risk-return profile for each type of property before making a purchase.

Wiesbauer advises property owners to gather all relevant documents such as the certificate of title, building specifications, floor plan, summary of utility costs, minutes of owners’ association meetings, deed of partition and, in particular, repair invoices. "Not every owner has all of these documents on hand in the event of a sale, but our brokers will be happy to help you obtain them."

Enquiries: Bank Austria ImmobilienService
Berit Dirscherl, Tel. +43 (0)1 5137477 - 90
E-mail: berit.dirscherl@ba-is.at, www.ba-is.at

About BA-IS
Bank Austria ImmobilienService was founded in 2001 in the interest of expanding the range of services provided to Bank Austria’s customers and is a subsidiary of UniCredit. The company has specialised in successfully brokering properties and providing extensive customer service and advice for ten years.