UniCredit Bank Austria analysis:
Falling prices, rising incomes and more favourable financing conditions are bringing about a turnaround in the property market
- Property prices have fallen by 3.5 per cent since 2022 - the 23.5 per cent increase in disposable household income over the same period has led to a significant improvement in the affordability of residential property
- However, property still costs around 30 per cent more than in 2008
- High demand for rental properties due to persistently high property prices continues to drive up rents at an above-average rate
- More favourable financing conditions led to a 54 per cent year-on-year increase in new property loans in Austria in the first half of 2025
- Forecast for the future: property prices are rising again, but the increase will remain moderate for the time being
“The fall in property prices, high income growth and the easing of monetary policy have made home ownership in Austria more affordable again over the past two and a half years “, says UniCredit Bank Austria Chief Economist Stefan Bruckbauer, adding: “Compared to 2008, the start of the property boom, property prices have nevertheless risen much faster than incomes. Affordability is currently almost 30 per cent lower than in 2008, which continues to prevent many households from buying their own home.”
The rise in interest rates for residential construction financing as a result of the tightening of monetary policy by the ECB and the stricter regulations introduced in August 2022 for the granting of housing loans triggered a decline in property prices in Austria. However, the price correction in 2023 and 2024 was moderate, as demand remained high due to the unchanged high demand for housing and construction costs and prices continued to rise. In addition, properties remained attractive as investment properties or as a hedge against inflation, meaning that the supply of properties for sale remained limited.
“Since 2022, property prices have fallen by a total of 3.5 per cent. The price decline stopped at the beginning of 2025, partly due to more favourable financing conditions. In the first half of 2025, property prices stabilised at the previous year's level”, says UniCredit Bank Austria economist Walter Pudschedl, adding: “While property prices are currently below the level of 2022, incomes have risen sharply. As a result, the affordability of residential property has improved significantly during this period. The real value of disposable household income has increased by 28 per cent in relation to property prices.”
According to estimates by economists at UniCredit Bank Austria, the average price per square metre for condominiums in Austria in mid-2025 was just under EUR 4,000 and around EUR 2,700 for single-family homes. This corresponds to a decrease of EUR 300 and EUR 200 respectively compared to 2022. The equivalized annual disposable median income of Austrian households of not quite EUR 50,000 was sufficient to finance 8.6m² of a condominium or 12.8m² of an average single-family home in the first half of 2025. That is a gain of two square metres for flats and even three square metres for detached houses. Or to put it another way: in the first half of 2025, a household had to invest almost 12 annual incomes for a 100m² condominium and almost 8 annual incomes for a 100m² house. In 2022, it was 15.5 and 10.5 annual salaries respectively. In 2008, however, only 8.5 or 6 annual incomes.
Turnaround in the property market
The correction in property prices and the sharp rise in incomes brought a turnaround on the property market in the first half of 2025, to which the easing of monetary policy also contributed. According to OeNB, the interest rate for new housing loans has fallen from an average of 4.2 per cent at the end of 2023 to 3.4 per cent in mid-2025. As a result, the monthly burden for a loan of EUR 100,000 with a term of 20 years has fallen from EUR 615 to EUR 570 today (capital repayment and interest) and is therefore seven per cent lower than one and a half years ago.
“Supported by the more favourable conditions, residential construction financing is on an upward trend again. The volume of new loans granted, which in the first half of 2024 was only €850 million per month - around a third of the first half of 2022 - rose by 54 per cent year-on-year to €1.3 billion per month in the first six months of 2025. However, after the slump of previous years, the total financing volume of €130 billion in mid-2025 did not yet reach the peak of €135 billion at the end of 2022”, says Pudschedl.
Increased demand for rental flats
However, the affordability of property, whether from own resources or through debt financing, has decreased significantly in a long-term comparison despite the recent improvement. Due to the high price level, the purchase of residential property is still difficult to finance for the majority of Austrian households. The relationship between property prices based on the OeNB's property price index and the median equivalised disposable income indicates a reduction in affordability of almost 30 percent by mid-2025 compared to 2008. For the lowest-income population group in the lowest decile, the dream of owning their own home, which was generally hardly within reach due to the low absolute income level, has receded even further into the distance due to the lowest increase in income.
“As the high property price growth since 2008 has made financing home ownership unaffordable for more and more households, the demand for rental properties has increased. In combination with the automatic indexation of rents, this has triggered a 17 per cent increase in rents in Austria since 2022. This is higher than general inflation”, says Pudschedl, adding: “The improvement in the affordability of property since 2022 has so far been too small to draw enough demand away from the rental market and significantly change the rental price trend. For the time being, rental properties will continue to be in greater demand than owner-occupied properties, which suggests that rental yields will continue to rise in the coming years."
Property prices are rising again, but at a manageable rate
Following the stabilisation of property prices in the first half of 2025, property prices in Austria are expected to rise again in the coming months. “Real income growth, more favourable financing conditions, lower supply due to lower construction output, increased construction costs and improved rental yield opportunities mean that property prices are expected to rise again in the coming years, probably more strongly for used properties than for new buildings”, says Pudschedl, adding: “However, the continued relatively high property prices, no return to the ECB's zero interest rate policy and weaker expected population growth will keep price increases moderate, at around the level of general consumer inflation.”
Further information at: Home ownership has become more affordable again in Austria, Unicredit Bank Austria, August 2025
Queries:
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Phone: +43 (0) 5 05 05-41957;
e-mail: walter.pudschedl@unicreditgroup.at