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Raiffeisen: Reversal in interest rates slows property prices | DiePresse.com

Economist Matthias Reith expects a “significantly slower travel speed”.

The reversal in interest rates initiated by the ECB will follow
Matthias Reith, economist from Raiffeisen, expects that years of upward trend will now also lead to a flattening in price increases on the market for residential property. He expects a “markedly slower travel speed”, so there shouldn’t be a prolonged or sharp price correction. “What has risen high does not necessarily have to fall low,” he said at a press conference on Wednesday.

Pandemic as a price driver

Property prices in Austria have risen since April 17
year continuously, so it is the Austrian
Global property cycle is considered to be one of the oldest yet
underway, according to the economist. Recently, the pandemic has also been considered
Price manager worked. This is closely related to the discussion
on the affordability of residential property. The price increases on the real estate market have so far been offset by falling interest rates, so that the monthly credit burden has barely increased.

They are unclear

In the fight against high inflation, the European Central Bank
(ECB) recently raised interest rates for the first time in ten years. As a result, loans are also becoming more expensive, and households with variable rate home loans are already feeling the effects, Reith said. He expects interest rates on variable home loans to rise to more than three percent in 2023. This was last the case in 2009. Despite the rise in interest rates, the credit burden should hurt, “but not go beyond the pain threshold,” the economist expects.

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The following applies: the longer the purchase, the more relaxed it is
households can benefit from the reversal in interest rates. Reasons are one
lower purchase price, a more advanced repayment and a
higher household income. Due to the rising interest rates on loans, the obstacle to the purchase of living space is getting bigger and bigger, “but not insurmountable,” said Reith. Anyone buying a property in the next year will have to spend about 43 percent of their net household income on interest and principal.

Muted question

Rising interest rates are likely to increase demand in the real estate market
dampen and thereby also slow down the rise in prices. With a
However, the economist does not expect a sharp price correction. It will
the case when rising credit rates meant that
Property owners can no longer afford to maintain their property
could and would be forced to sell. Then one would come
decreased demand increased supply. There are currently no signs of such a development for Reith on the Austrian market.

In principle, the affordability of living space lies in Austria
in the EU comparison in the middle, Caspar Engelen explains from
Raiffeisen Research. In their own home the Austrians would
According to Eurostat 2020, Austrians average around 18 percent
of their net household income for housing costs. Anyone living in rent had to spend about 22 percent of their disposable income on it. The ownership rate was about 55 percent in 2020, of which about half were owners whose loan had already been paid off.

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High burden for low earners

People with low incomes are taxed significantly more heavily.
According to a Gallup poll commissioned by Raiffeisen Immobilien,
every third person with an income of less than 1500 euros per
month, problems affording housing.

In general, housing affordability is a much-discussed topic
subject, said Peter Weinberger of Raiffeisen Immobilien. He sees
the renovation of used real estate and the revitalization empty
standing building as the key to create more affordable
Living space and above all referred to abandoned town centers in rural regions.

In Vienna, it is necessary to check whether the existing social housing is fairly distributed. In addition, the tenancy law must be simplified so that owners do not shy away from renting out of legal uncertainty or fear of problems. (APA)

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