Published on and written by Cyril Jarnias
Long perceived as one of the most stable markets in Europe, Austria’s real estate sector is currently navigating a pivotal phase. After more than a decade of nearly uninterrupted price increases, the combination of surging interest rates, inflation, new credit regulations, and ESG requirements has triggered a marked cooling, followed by a stabilization phase. The year 2025 thus marks a transitional moment: price corrections appear to be nearing their end, rates are easing, but construction remains sluggish and housing pressure persists, especially in major cities.
The market is no longer characterized by a general rise, but by a polarization between winning segments (well-located and energy-efficient homes, logistics and hotel properties) and weakened assets (older buildings requiring major renovations, isolated houses in rural areas, and obsolete office space).
A market that moved from boom to correction, then to stabilization
For years, Austrian residential real estate showed almost linear growth. Between 2015 and 2021, house prices in Vienna climbed nearly 41%, with annual increases of up to 10–12% at the peak of the 2020–2021 period. The pandemic even accelerated demand, fueled by rock-bottom interest rates.
This cycle reversed sharply from 2022 onward, when the European Central Bank initiated an interest rate hike unprecedented in decades. The cost of mortgage credit soared: the average rate on new home loans, around 1.2% in 2021, rose above 3.5% in 2023, before stabilizing around 3.2–3.6% in early 2025. At the same time, inflation flirted with 8–9% in 2022–2023, eroding household purchasing power.
The residential price index fell by 2.35% in 2023, marking the first price decline since 2004.
However, this is not a crash. The market had built up spectacular gains: in Austria, rents rose by about 90% between 2005 and 2023, and in the capital, apartments have gained nearly 22.5% since 2016. Even after these recent declines, most regions remain well in positive territory over five years, with, for example, a cumulative growth of around 35% in Vienna.
Projections for the future converge on a “soft landing” scenario. For 2025, national forecasts suggest price growth between 0% and 1%, followed by a moderate recovery of 1–2% in 2026 and 2–3% in 2027. Longer term, over 2030–2045, analysts expect a sustained appreciation of 2–3% per year, with major urban centers expected to outperform rural areas.
Transaction volume down from the peak, but normalizing
The price reversal was accompanied by a sharp decline in activity. The volume of real estate purchases, which peaked at €43 billion in 2021, dropped to €24.1 billion, a decrease of about 0.7% year-on-year in the latest reading, and nearly halved from the boom’s peak. The number of home sales (around 43,300 properties sold in 2024) has also returned to levels more consistent with a “normal” market phase, following the excesses before the rate hikes.
The total stock of housing loans in Belgium in 2024, in billions of euros.
Authorities played an active role: starting in 2022, the financial regulator imposed stricter conditions (at least 20% down payment in practice, debt-to-income ratio limited to 40%, maximum maturity of 35 years via the KIM-VO). This regulation is set to expire in June 2025, which should ease credit access and support a gradual recovery in transactions.
Marked contrasts between regions and property types
Behind the national average, price developments are very heterogeneous. Some regions are experiencing a clear correction, while others resist, or even continue to rise in certain segments.
Tyrol, Vienna, Salzburg: expensive markets, but different trajectories
Tyrol remains the most expensive region in the country. A 150 m² house there costs an average of €1,074,519, or about €7,163/m². This level reflects land scarcity, tourist appeal, and strong demand for mountain residences and “green” homes. Yet prices have only marginally declined (–0.2% in 2024), a sign of remarkable resilience.
Vienna, which remains the most expensive federal state after Tyrol, has an average price of about €6,414/m² for a 150 m² house (€962,144). However, the capital has experienced a real correction: houses dropped about 3.8% in 2024, while apartments held up better with an average decline of only 1.2%. The decline is more pronounced for single-family homes (–4.43% in Q4 2024 year-on-year) than for condominiums, especially new developments which remain nearly flat (–0.1% for new apartments, compared to –2.63% for older ones).
Salzburg’s real estate market illustrates extreme segmentation: it is one of the most expensive (€9,860/m² on average) with new segments rising (+5%), but experienced the country’s most brutal correction in 2024 (-9.7% average for houses). This gap reflects a severe adjustment on overvalued properties, while high-quality products aimed at tourist or luxury clientele hold up well.
The table below provides a comparative overview of average prices for 150 m² houses by region:
| Region | Average price 150 m² house | Average price per m² |
|---|---|---|
| Tyrol | €1,074,519 | €7,163/m² |
| Vienna | €962,144 | €6,414/m² |
| Salzburg | €868,421 | €5,789/m² |
| Vorarlberg | €825,000 | €5,500/m² |
| Styria | €474,375 | €3,163/m² |
| Burgenland | €363,480 | €2,423/m² |
There is nearly a one-to-three ratio between Tyrol and Burgenland, illustrating the extent of regional disparities.
New construction vs. existing homes: a two-speed market
Another major divide: between new and existing homes. In 2024, new homes still saw their prices rise by 2.7%, while existing properties fell on average by 1.5%. The decline is particularly marked for detached single-family homes (–5.2%) and, even more so, for building land (–9.1%), directly penalized by higher financing costs and construction costs.
This divergence is due to several factors. New projects are generally better aligned with energy and ESG standards, making them more attractive—and allowing them to justify a “green premium” despite a more difficult context. Conversely, many older properties require major renovation work to remain competitive against future energy performance standards. Without a modernization strategy, these assets risk becoming “stranded assets”—properties that are depreciated because they are unsuitable for regulatory requirements and tenant or buyer expectations.
Generally speaking, the properties suffering the most today are large isolated houses in expensive regions, rural properties with poor transport links, and buildings requiring costly renovations. Conversely, small apartments, well located in cities and close to public transport, remain highly sought after.
City focus: Vienna, Graz, Linz, Salzburg
Major cities concentrate the majority of demand and the strongest tensions between supply scarcity and economic attractiveness.
In Vienna, the average residential square meter price is about €5,500, but the differences between districts are considerable. The Innere Stadt (1st district), a UNESCO World Heritage site, averages nearly €24,977/m², with peaks at €30,000/m² for exceptional properties, but with very low rental yields (1.14% to 1.82%). Central districts (2nd to 9th) range from €6,400 to €8,500/m², while outlying neighborhoods like Favoriten or Simmering have much lower prices, between €3,500 and €4,000/m².
Graz, the country’s second-largest city, shows a surprising dynamic. In February 2025, house prices there hovered around €5,491/m², with a spectacular 44.6% year-on-year increase, driven by strong population growth and a booming student population (over 31,000 students at the university). Linz, an expanding industrial hub, stands at around €5,060/m², up 8.4% year-on-year, supported by major industrial investments. Salzburg remains, as noted, an extremely expensive market, with average prices above €9,800/m², fueled by its cultural prestige and massive tourism (over 250,000 visitors for the summer festival alone).
A supply shortage worsened by the collapse of new construction
If prices have fallen, it is not due to overbuilding. Quite the opposite: Austria is facing a worrisome decline in residential development activity. The causes are well known: rising material and labor costs, soaring interest rates, squeezed developer margins, more cautious banks, and tighter equity and pre-sale requirements.
Number of housing units authorized in the first three quarters of 2024, down 4.9%.
In Vienna, where about two-thirds of residents live in municipal or subsidized housing and where 80% of new apartments are funded by the local subsidy system, authorities are trying to counter the trend by aiming to build 13,000 new units per year (up from about 10,000 previously). But the overall construction slowdown, combined with rising costs and difficulty finding affordable land, points to a sustained supply deficit.
Number of assisted living units built annually in France, compared to an estimated need of 3,100.
In this context, professionals warn: if conditions do not improve quickly, the market could face a structural supply crisis, with sustained inflationary pressure on rents and prices in tight areas.
A rental market under pressure, despite caps
Austria’s housing structure is very different from many neighboring countries: renting dominates, especially in major cities. The homeownership rate is only about 54.3% nationally, well below the EU average of over 70%. In Vienna, the situation is even more pronounced: about 75% of households are renters, and nearly 60% live in municipal or subsidized housing.
Rents continue to rise
Despite the slowdown in sale prices, rents continue to climb. Between 2005 and 2023, they nearly doubled, with a cumulative increase of almost 90%. In the third quarter of 2024 alone, the average rent per unit (excluding utilities) rose 4.9% year-on-year to €496.5 per month, while the average rent per square meter increased 4.2% to €7.40/m². Limiting to properties rented on the open market, the national average rent stands at about €9.4/m², peaking at €11.3/m² in Salzburg.
The increase in rents, as in Vienna where they jumped 8.2% in 2023, is due to several combined factors: the scarcity of new construction, the continuous influx of new residents to big cities, the increase in the number of households (especially single-person households, which account for over 17% of households), and inflation in utility and maintenance costs.
The following table summarizes some key rental market indicators:
| Indicator (Austria / major cities) | Recent value |
|---|---|
| National average rent (all housing, Q3 2024) | €496.5/month |
| National average rent per m² (Q3 2024) | €7.40/m² |
| Average open-market rent (approx.) | €9.4/m² |
| Average rent Salzburg (open market) | €11.3/m² |
| National average gross rental yield (Q1 2025) | 3.5% |
| Average gross yield Vienna (Q1 2025) | 4.12% |
| Share of rented housing in Vienna | ~75% |
| Homeownership rate nationally | ~54.3% |
Yields remain modest, especially in prime areas. In Vienna, they range from 1.14–1.82% in the Innere Stadt to 2.38–6.87% in more affordable outlying districts. In Salzburg, apartments offer yields of 3.18–4.25%, while in Graz they range from 2 to 3.13%.
Strict rent regulation, but with variable geometry
Austria’s legal framework for renting is known to be very tenant-protective, particularly through the Mietrechtsgesetz (MRG). A large part of the rental stock, especially in older buildings in major cities, is subject to various forms of rent control: reference rents (Richtwertmietzins), category rents (Kategoriemietzins), and “appropriate rent” caps (angemessener Mietzins). Under this system, a tenant can take the landlord to the relevant authorities to check if the rent exceeds the allowed cap, with the possibility of a refund of overpayments for up to three years plus interest.
As of 2025, rents for the majority of regulated housing are frozen. This measure follows rapid increases (up to +25% cumulative between 2021 and 2023). The freeze will be followed by limited increases: 1% in 2026 and then 2% in 2027.
Nevertheless, there are two important caveats. First, a significant portion of the rental stock is completely or partially exempt from these caps, particularly newer housing, single-family homes, and certain commercial leases, which then fall under the general Civil Code and free negotiation. Second, even in the regulated segment, the end of the freeze scheduled for April 1, 2025 will result in automatic adjustments, capped at 5% for reference and category rents, but which will further burden the housing budgets of many households. Non-profit landlords (cooperatives, associations) also plan to increase rents and maintenance contributions by the same proportions.
Consequence: for new entrants to the market, especially young households and those arriving from abroad, the combination of high rents in the free sector and waiting lists for social housing makes access to affordable housing increasingly difficult, particularly in central Vienna and other major university cities (Graz, Innsbruck, Salzburg).
Mortgage credit: tightening, then gradual easing
The most brutal shock of the past two years came from financing. Within a few quarters, the cost of a ten-year loan rose from about 1.3% in 2022 to nearly 4% in 2023, before easing slightly to around 3.2–3.6% in early 2025, driven by ECB rate cuts (the key rate lowered to 2.90% in early 2025 after several successive cuts since mid-2024).
This rate hike was compounded by a regulatory tightening via the KIM-VO, imposing:
– a significant minimum down payment (at least 20% of the price, excluding fees),
– a debt service limit of 40% of income,
– a maximum loan term of 35 years.
This is the annualized decline in new mortgage lending at the peak in 2023.
Since the end of 2024, however, there has been a slight easing. The average rate on new housing loans fell from 4.16% in December 2023 to 3.63% a year later, and the stock of loans has an average rate of about 3.08%, still far from pre-crisis levels (2.12% in 2022) but already declining. The scheduled expiration of the KIM-VO in June 2025 should also give banks more leeway to tailor their conditions to the quality of applications, with the possibility of lending over longer terms or with lower down payments in some cases.
The era of very cheap credit is over. For a typical loan of €250,000, monthly payments have increased by nearly 30% since 2022. In addition, acquisition costs (transfer taxes, land register entry, notary, agent, taxes) add 9 to 13% to the purchase price. This situation is causing many households to remain tenants, thereby increasing pressure on the rental market.
Residential real estate: price stabilization, persistent rental tensions
For the residential segment, the diagnosis is now clear: the market has left the euphoric phase, experienced a moderate correction, and now appears to be stabilizing. According to most studies, prices should stay near equilibrium in 2025, before slowly starting to rise again from 2026 onward, particularly in high-demand areas like Vienna, Tyrol, and certain university cities.
Housing demand rests on solid fundamentals: continued population growth (+0.4% per year), increasing urbanization (nearly 60% of the population in urban areas), a rising number of households, an aging population, and an increase in single-person households. In Vienna, the population is expected to increase by 310,000 by 2053, reaching about 2.3 million residents, which will exert constant pressure on the real estate market.
At the same time, supply is struggling to keep up, due to the slump in housing starts and a structural shortage of affordable land. In the short term, the market therefore remains unbalanced, with strong tension in the rental sector, moderation in sale prices, and increasing segmentation between “prime” properties (central, energy-efficient, near transport) and assets that are difficult to repurpose.
On the public policy front, several measures aim to smooth the path to homeownership: a proposal to eliminate transfer taxes for first-time buyers, a temporary reduction in land register registration fees under certain “urgent housing need” conditions, and a planned revision of some construction standards. It remains to be seen whether these measures will be sufficient to offset the weight of interest rates, construction costs, and environmental regulations.
Offices, logistics, retail: divergent destinies
The commercial real estate market in Austria is also undergoing a profound restructuring, with a clear hierarchy between winners and losers.
In the office sector, demand has transformed rather than collapsed. The widespread adoption of remote work and hybrid work models has reduced gross space needs for some companies, but has increased expectations regarding quality: flexible spaces, well-connected, equipped with cutting-edge technology and high environmental performance.
In Vienna, the office market remains undersupplied in truly modern and green properties, even though gross demand is weakened by the economic climate. Vacancy rates are rising slightly but remain contained, as the development pipeline has been scaled back. Large contiguous spaces are particularly scarce, supporting prime rents, especially in the Central Business District where rents remain stable or even trending upward for ESG-certified buildings with high-end amenities. Prime yields hover around 4.75% for the best locations, with a possible downward movement due to the lack of available core assets.
Demand for flex-offices (coworking, serviced offices) is growing strongly, especially in major cities like Vienna. This trend is mainly driven by start-ups, freelancers, and foreign companies in the process of establishing themselves. It meets a need for flexibility and a desire to limit long-term lease commitments in an uncertain economic context.
Logistics: supply scarcity maintains pressure
Logistics is one of the big winners of recent years. In the Vienna area, the stock of logistics and industrial space is around 8.19 million m², split 67% pure logistics and 33% production. After a sharp imbalance between supply and demand, the arrival of new projects reduced excess tension in 2024, but vacancy rates remain very low, as most projects are pre-leased and developers are cautious about speculative developments.
Prime rents for well-located and equipped warehouses range between €7 and €9/m².
Retail: polarization between prime high streets, luxury, and discount formats
Austrian retail did not regain enough momentum in 2024 to significantly boost sales, but the situation is not uniform. Tourism, particularly in Vienna, has rebounded strongly: 139.73 million tourist overnight stays were recorded in the country in 2023, with a direct impact on main shopping streets. In the capital, footfall on major thoroughfares is approaching 2019 levels, in the famous “Golden U” and on Mariahilfer Straße.
In this context, the luxury segment shows signs of renewed dynamism in 2025, with new brands ready to establish themselves on the best locations, provided they can secure adapted rents and flexible terms. Experience-driven concepts (leisure, entertainment) and discounters also continue to advance, capitalizing on the search for low prices or attractive activities in shopping centers.
In contrast, secondary (B) and tertiary (C) locations are suffering: vacancy is increasing, retailers are taking longer to decide, and landlords have to make more concessions (graduated rents, early termination clauses, contributions to fit-out works). Increasingly, the conversion of retail space into residential or office use is being considered, where configuration and zoning regulations allow.
Hotels and short-term rentals: the return of tourist demand
After the pandemic-related slump, Austrian tourism experienced a true rebound. In 2023, the country recorded nearly 139.73 million overnight stays, up more than 10% year-on-year, and 2024 figures suggest record levels. The hotel industry has benefited: this asset class, long seen as risky during the health crisis, has become a mainstream investment class again. Investors are particularly interested in well-positioned establishments in major cities and key tourist resorts.
Average annual revenue generated by short-term rentals in Vienna, fueling investor interest.
Salzburg also benefits from the tourist windfall, with short-term rentals occupied on average 285 nights per year and a median occupancy rate of 78%. The combination of decent yields (3.66% average on apartments) and a very liquid vacation market continues to attract domestic and foreign capital.
ESG, energy, and regulation: the new market matrix
Today, it is difficult to analyze the Austrian real estate market without mentioning the growing role of climate policies and ESG criteria. The country has set an ambitious carbon neutrality target by 2040. Buildings, which account for about 40% of EU energy consumption, are at the heart of this transformation.
The energy renovation movement in Austria is structured by national laws (such as the Renewable Energy Expansion Act of 2021 and the Renewable Heating Systems Act) and European directives. These texts mandate the gradual phase-out of fossil fuel boilers and their mandatory replacement. Numerous subsidy programs support insulation work, installation of photovoltaic panels, or heat pumps.
At the same time, the European taxonomy and disclosure regulations (EU Taxonomy, Disclosure Regulation, soon the Corporate Sustainability Reporting Directive) require large investors to report on the sustainability of their portfolios. Labels and certifications (LEED, BREEAM, ÖGNI, klimaaktiv…) are multiplying and are becoming a new minimum standard for office buildings, new residential developments, and shopping centers.
A property’s energy performance directly influences its value and financing. “Green” certified buildings command higher rents and better liquidity at resale. Conversely, energy-intensive properties without a renovation plan depreciate. Additionally, many banks now offer preferential financing (reduced rates, green bonds) conditional on the property’s energy performance.
For households, rising energy costs also make efficient homes more attractive: according to studies, converting a standard house into a passive house could save about €9,500 over time, partially offsetting the initial extra cost. Austria is in fact one of the countries with the highest density of passive houses in the world, with over 14,000 such buildings in Tyrol alone.
The role of international investors and the recomposition of capital
After a period dominated by domestic investors, international players are gradually returning. Improved financing conditions, price stabilization, and the country’s reputation for legal security (Austria regularly ranks in the global top for property rights indices) are attracting funds and institutional investors again, particularly from Germany, Switzerland, and some Asian countries.
Overview of geographic preferences and target asset types for investors in the Austrian market.
Focus on major cities, with a clear preference for Vienna and highly liquid markets like Salzburg or Innsbruck.
Preferred target: residential buildings generating rental income.
Investments in logistics assets and core-quality office space.
Interest in well-located hotels and land for mixed-use developments (residential, commercial, etc.).
Developments on land must be aligned with environmental, social, and governance (ESG) standards.
In the Vienna high-end residential segment, Austrian buyers account for about 60% of the clientele, while 40% are foreign, with a strong presence of Eastern European wealth, but also from Switzerland, the United States, the Middle East, and Hong Kong, especially in the “super prime” of the Innere Stadt. Prices there have continued to climb, with a year-on-year increase of about 29.8% in February 2025 in the 1st district, completely out of step with the moderation in the rest of the market.
Outlook: a more selective, but structurally sound market
Overall, current trends in the Austrian real estate market paint a complex picture, characterized both by tension forces (slowing construction, rental pressure, aging housing stock, ESG constraints) and supported by solid fundamentals (urban population growth, institutional stability, exceptional quality of life, low household debt).
For the coming years, several key trends emerge.
First, the end of the price decline appears near. Most scenarios anticipate stabilization in 2025, followed by a moderate recovery from 2026 onward, especially in major centers and sought-after tourist regions. Poorly connected rural areas, however, are expected to show weaker trajectories.
Well-located, small-to-medium-sized, energy-efficient, and well-connected properties will remain in high demand. Conversely, large outlying houses, energy-intensive buildings without renovation, and obsolete retail or office spaces risk long-term depreciation, unless converted.
Third, the issue of affordability will remain central. Despite the slight decline in prices and the easing of rates, the cost of acquisition (high prices, large down payment, ancillary costs) will continue to hinder homeownership for a large portion of households, especially in Vienna. Public policies—subsidies, social housing programs, tax reforms—will play a key role in correcting these imbalances.
The green transition is reshaping the sector by directing capital toward green projects and accelerating the upgrading of the existing stock. For owners and investors, the ability to seriously integrate ESG criteria into development, management, and renovation strategies is a major determinant of long-term value.
In an environment that is just emerging from a double recession (–0.8% GDP in 2023, –0.6% in 2024) but where growth is gradually returning (between 0.8% and 1.6% expected for 2025–2026, inflation falling back to around 2%), Austrian real estate is repositioning itself. It is no longer that straight-line market where everything was rising, but a more selective, more regulated, greener ecosystem. For players able to read these trends and adapt—by betting on quality, energy efficiency, and solid locations—it continues to offer attractive prospects, both in terms of income and long-term value appreciation.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
