Austrian Real Estate Market Outlook for 2025

As 2025 is starting, it's time to look at the opportunities and risks in the real estate sector for the year ahead. The real estate housing prices finished 2024 with a drop. According to OENB, the data until Q3 2024 records an annual decrease in the housing price index of -2,20% overall in the country and -3,50% in Vienna.

The stabilization of inflation and dropping interest rates set the stage for cautious improvement in real estate dynamics in the coming year. Additionally, regulations, sustainability initiatives and regional developments could play a supportive role. Let's explore these factors in greater depth to provide useful information on the residential and commercial property markets for the coming year.

Residential Overview

Demand For Residential Purchases

There are contradictory signs about the demand for residential property purchases. On the bright side, the intention of The European Central Bank (ECB) to further ease the interest rates in 2025 due to lower inflation could alleviate some credit burden off individuals and create additional demand for housing. This news also goes well with the expected expiration of the KIM Regulations in mid-2025. Measures that protected the banking system from systemic risks, yet limited residential property financing, will no longer apply. This is going to ease lending restrictions, making it easier for buyers to secure loans. These changes are likely to revive activity, particularly among middle-income earners and young families who have been locked out of the market due to those regulations.

On the other hand, Austria's economy performed hesitantly in 2024. The GDP is expected to grow by 1.0% in 2025, following a 0.6% decrease in 2024. Although currently balanced, structural problems in labor and energy costs still pose a risk of worsening the demand factor, especially in a scenario where geopolitical pressure rises. Additionally, the rising of U.S. tariffs in 2025 will create further pressures for businesses and employment in the country.

Supply For Residential

Onto the supply, information from Statistics of Austria shows that the number of permitted dwellings fell to 46,565 in 2023 - a 27% decline compared to 2022 - and continued its downward trend with 10,672 permitted in Q2 2024. That is an astonishing 17.9% year-on-year drop. One of the reasons for this continuous downtrend from 2021 onwards is due to more expensive financing for construction companies and increased construction costs. Secondly, developers seem to be cautious about adding new stock to the market when prices are falling. In an uncertain environment like this one, that’s actually a healthy sign for the market. It naturally restricts the risks of oversupply and harsh price drops in residential prices.

Office Market Overview

Demand for Office Spaces

The Austrian office market remains resilient, particularly in prime locations like Vienna. Demand for ESG-compliant spaces remains robust, driven by corporate sustainability goals and stricter EU regulations requiring energy-efficient commercial buildings.

On a European level, companies increasingly prioritize green-certified offices to meet environmental standards, reduce energy costs, and improve their ESG profiles. This trend has also heightened competition for modernized, sustainable office spaces, particularly in urban areas not only in Vienna but in other parts of Austria like Graz, Linz, and Salzburg, where office new office spaces are experiencing growth in rents.

At the same time, hybrid and remote work models continue to reshape office demand. Occupiers are consolidating office footprints, favoring smaller, higher-quality spaces in premium locations. A report from CBRE states that 55% of surveyed companies plan to reduce their office space over the next three years, favoring flexibility and enhanced building quality.

Supply and Vacancy Rates

Prime office spaces in Vienna continue to perform well. The vacancy rate of office spaces in 2023 was at a historical low of 3.8%. In 2024 the same metric made a new low of 3.3%. This indicates that despite the challenging business conditions, companies are still actively looking for new office space purchases. One of the reasons for the low rate of available office space is the stagnant supply of new ESG buildings, which would turn around in 2025, as 121,000 square meters of new office supply is expected to enter the market.

In regional hubs, Linz’s stock is set to grow by 86,000 square meters by 2026, while Graz and Salzburg focus on modernizing older properties to meet sustainability demands. These cities are leveraging lower operational costs and strategic developments to attract businesses seeking alternatives to Vienna’s high costs.

Key Trends in 2025

• Easing Financing Conditions for Buyers

The expiration of the KIM Regulation and anticipated interest rate cuts in 2025 are poised to ease financing burdens for buyers, especially middle-income earners and young families. These measures are expected to revitalize residential property demand in both urban and suburban markets.

• Regional Disparities in Price and Demand

According to a report from Raiffeisen, high-end areas and regions with more homeowners rather than rental and investment apartments turn out to be robust in these conditions. For example, prices in the first district in Vienna remained stable and even recorded a minor increase by +2,4%. This trend is likely to remain during 2025.

Conversely, regions with low ownership rates and cities like Linz, Innsbruck and Salzburg may continue to face headwinds, as prices there recorded drops between -5% to -10% for 2024. On the other hand, such areas may present good opportunities for entry throughout the year and may be positively affected by an increase in the demand from the middle-income class.

• Growth in Residential Rents

Residential rental markets remain tight, particularly in cities like Vienna, where strong demand and limited supply sustain upward pressure on rents. Regional hotspots with moderate housing costs are expected to see steady rental growth.

• Undersupply in Residential and Commercial Real Estate

The Austrian real estate market is defined by low supply in both residential and commercial sectors, driven by high construction costs and cautious developer activity. This constraint is highly expressed in urban centers like Vienna. Simultaneously, the growing emphasis on ESG-compliant buildings is reshaping investment priorities, particularly in Vienna’s office market, where green-certified completions dominate. Regional hubs such as Graz and Linz are stepping in to meet demand with affordable, modern office spaces, offering attractive alternatives for businesses seeking cost efficiency and sustainability.

Conclusion

In summary, the Austrian real estate market remains in a phase of adjustment that began in 2024, with moderate price corrections expected to continue in 2025. Optimism surrounds the easing of financing conditions and the resilience of high-end properties, which are likely to maintain their value. Regional hubs with higher homeownership rates offer additional stability compared to rental-heavy urban areas. However, dynamic factors such as geopolitical risks and shifting trade policies may still influence the broader economic outlook, making it essential to approach investments with vigilance.

For Residential Buyers: Easing financing conditions and price adjustments in urban districts could create opportunities for strategic purchases in 2025. Buyers should prioritize areas with strong rental demand or stabilizing prices, particularly in premium locations or resilient regional hubs.

For Office Rental Purchasers: As ESG compliance becomes a priority, securing leases in modern, green-certified office spaces can offer competitive advantages. Regional hubs like Graz and Linz provide cost-effective options with emerging potential, while secondary markets may require cautious evaluation to ensure long-term value.