The Austrian property market remained broadly flat and significantly under-performed the rest of Europe from the early 1990s to 2005. Property was not traditionally viewed as a tradable asset class by a local population that tended to buy houses or apartments and live in them for a generation.
It was not until 2005 that legislation finally forced the Austrian authorities to lift the barriers governing foreign ownership of property, almost 10 years after EU membership. The market was viewed as ‘untouched’ by these initial foreign buyers, and prices inevitably began to rise. The attraction of Austria was obvious to these early foreign investors.
Austria was viewed as the last undiscovered alpine territory for buyers who had witnessed, and been priced out of, the more established French and Swiss markets.
Since 2005, tight control over development has resulted in gradual price rises as the authorities aim to keep a lid on the over-development.
Like many other rural or semi-rural areas, demand for Austrian property boomed in the periods after the Covid-19 lockdowns across Europe. Demand from second home buyers from the large urban centres of Europe led to year-on-year prices rising by up to 10% in many of Austria’s popular ski resorts.
Buyers flocked to the region to complete purchases in the year after the first wave of Covid-19 lockdowns.
This ‘race for space’ was particularly felt in the market for large detached chalets with demand far outstripping supply in popular resorts such as Zell am See, Kaprun, Saalbach-Hinterglemm, Kitzbuhel and others.
As Europe slowly recovers from the COVID-19 pandemic, Austria is predicted to be one of the key benefactors. Demand for property is expected to be driven by the following factors:
- Continued growth in the tourist industry, particularly outside the traditional winter market
- Higher yields compared to other alpine markets attracting international investors
- Well capitalized local banking sector with low mortgage borrowing rates
- Risk-averse investors seeking stability in blue-chip economies.
Austrian tourism supports yields on new built alpine ski property
Austrian tourism has grown steadily over recent years and successfully climbed out of recession. It is also expected to be one of the most significant growth industries as Austria emerges from the COVID-19 pandemic.
Tourism is now one of Austria’s fastest-growing sectors. According to figures, tourism contributed nearly 30 billion Euros to the economy in 2019 and taking into account travel, the figure rose to 44 billion Euros.
In 2019 the Austrian government introduced a new tourism strategy — the Master Plan for Tourism. The plan aims to support and boost the tourism sector by developing sustainable programmes where tourists and the local population can co-exist, causing minimal environmental disruption. There is also an emphasis on strengthening family-run and owner-managed enterprises. In addition, investment in the leisure and skiing sector aims to deal with the impact of climate change in the winter tourism industry.
As tourism recovers again post-Covid this the upward trend for Austrian tourism is expected to continue with many of these visitors becoming future property investors.
New direct flight routes (such as Amsterdam to Salzburg) are key drivers of the increase in tourism as well as popular new sleeper train services such as the daily ‘Nightjet’ service connecting Dusseldorf to many of the popular Tyrol ski resorts via Innsbruck.
Strong, year-round, tourism has resulted in above-average yields for property investors purchasing apartments in designated ‘apart-hotel’ tourism residences.
Yields are particularly strong in the lower-lying ‘dual-season’ resorts where the summer rental season can be as long and profitable for investors as the traditional winter season.
What are the different types of property available to buy in Austria?
In Austria, there are strict regulations on how each different properties can and can’t be used. Here we look at the three main types.
- A ‘hauptwohnsitz’ is an apartment or chalet that must be registered as the buyers’ main residence in Austria. These make up the bulk of the housing stock and are primarily of interest to buyers looking to move to Austria full time or perhaps semi-retirement.
- These properties cannot be rented out to tourists for holiday lets and therefore tend to command lower prices per m2 than a similar ‘tourism’ property.
- Touristische Vermietung
- A property may have permission for ‘touristische Vermietung’ i.e it can be rented out to tourists on a short-term holiday let basis via websites such as Airbnb and Booking.com. All guests need to be registered with the local council or ‘geminde’ and pay tourist tax during their stay.
- It is worth nothing that the exact rules governing this vary from state to state so please check with your agent. In Salzburgland for example it is now forbidden to rent touristically any apartment or chalet that was not used for holiday lets before 1st January 2018.
- Zweitwohnsitz properties can be either apartments or chalets and have no rental obligation.
- They can be used as pure ‘second homes’ by their owners who are free to use their property as much or as little as they wish.
- These Zweitwohnsitz properties are incredibly rare and tend to sell very quickly. There are certain areas that are designated ‘zweitwohnsitz’ regions where all the properties are second homes. These are generally areas that were deemed not suitable for Hauptwohnsitz in the 1960s and 1970s and where the local councils at the time were trying to encourage development and investment.
- Another option for a Zweitwohnsitz is a property that was registered as such before the 1st of May 1969 when the first law against second homes in Austria came into effect.
- Apart-hotel are a popular option for foreign investors looking to buy a holiday home in Austria.
- These are designated commercial residences and have been given planning permission specifically for tourism purposes.
- Owners than have the option of a few weeks personal use each year while the on-site management will then rent out your apartment for the rest of the year.
- Owners are usually paid their share of the rental income every quarter in arrears. Depending on the management agreement, owners either receive a share of the pooled income or the actual income generated by their own apartment.
- There are various tax benefits of buying a property in an ‘apart-hotel’ such as the ability to reclaim the VAT on the purchase price of the property.
- If you do choose to reclaim the VAT on the purchase price then you are under an obligation to the tax authorities to rent out your property and make a ‘profit’ over a 20-year period.
The legislation on how to use a property in Austria is designed to protect the local economy (guests spend more and create more jobs than second home owners), to prevent local house prices from being pushed up by foreign investment and to too ensure that it is sufficiently affordable housing for local residents.
It is this legislation that helps keep Austria’s economy stable, ensures that affordable housing is available to locals, prevents ‘cold beds’ and keeps Austria’s ski resorts lively year-round.
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