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Property Prices Rise In Austria

News Posted On: 23 January 2014

Austrian property news

The low rates promoted by the European Central Bank have aided in fueling the increase of prices in Austria’s residential property market. The phenomenon is not just seen in Austria, but many other neighboring countries in the Eurozone. As a matter of fact, the increase in prices has been so significant in Austria that real estate agents are speculating that their nation may be forced to deal with a real estate bubble.

The financial stability of a country can be totally wrecked by real estate bubbles as confirmed by nations such as Greece and Portugal, so the Austrian central bank has revealed that a new fundamental price indicator has been created to help keep the situation in check.

Between 2007 and mid-2013, prices of residential properties in the country increased 39 per cent, marking the highest price increase in the Eurozone. Vienna, the country’s capital has been responsible for most of the increases. Used apartments across the country experienced the most significant price increases. Prices of new apartments and single family homes also increased.

Low interest rates helping property market

The Central Bank has revealed that low rates of interest have significantly contributed towards increasing real estate prices in Austria. Low interest rates means that mortgages are now less expensive, making it easy for investors to secure finances and apply for the purchase of a property.

The primary investors in Austrian property are considered as those who are seeking “insurance for the future” whilst hoping to put their money in a profitable pool.

The luxury apartment market in Vienna has been infiltrated with foreign investors while the market for smaller apartments has been filled with local investors. Austria isn’t Europe’s only nation experiencing rising property prices.

Urban properties are being highly overvalued in some areas in Germany owing to low interest rates. While some of the properties are overvalued by more than ten per cent, some others in attractive larger cities have seen overvaluations as high as 20 per cent. However, the capital city of Austria has already topped that.

Overvalued Vienna, undervalued Austria

Residential properties in Vienna are overvalued by 21 per cent, according to the Austrian central bank. Apart from the capital city, real estate across the country is undervalued by as much as eight per cent. Real estate analysts say that prices have arrived at a plateau. They believe that prices can even fall in some parts of the market owing to the risk of a housing bubble.

The constant increase in real estate prices risks lowering the financial stability. Some experts claim that while corrections in home prices may cause “perceptible” losses for some property owners, it is highly unlikely that the phenomenon will result in major dangers or risks to financial stability.

There are indications that investors are investing high levels of equity into the property market. The growth of housing loans is presently low – the same as household debt in comparison with foreign markets. Household debt levels in comparison with GDP are also falling, revealed the central bank.

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