AK Study: Purchase Prices for Old Rental Buildings Have Risen Sharply Since 2000

A study by the Vienna Chamber of Labor in collaboration with the Vienna University of Technology shows that an average old building rental house could still be purchased for 573,000 euros in the year 2000. In 2022, the inflation-adjusted average price for such a building was already 3.5 million euros, which corresponds to an increase of 511 percent.

AK Study: The Classic Viennese Landlord is Dying Out

Ritt spoke at a press conference about a "crazy price dynamic," the price increase being significantly higher than inflation, which was 62 percent in the period from 2000 to 2021. Construction costs increased by 98 percent during that time. The higher purchase prices must be recouped, "rent gouging is a prerequisite for the business model," said Ritt. According to AK calculations, about 90 percent of rents in old buildings are excessive. On the buyer's side, the share of commercial buyers has significantly increased during that period, according to AK. "The classic Viennese landlord is dying out, it's moving towards professionalization and that also has price implications," criticized Ritt.

For refinancing the investment, house buyers have several options, according to AK, "legally, this is rarely the case," said Ritt. One option is demolition and new construction, which can increase the number of apartments and the new construction is no longer subject to the Tenancy Law (MRG). Another option is to sell the apartments as property, which also exempts them from the MRG. Even with an attic conversion, the new apartments fall out of the MRG. "One thing is common to all these strategies: the tenants have to leave," said Ritt. New rental contracts are then usually significantly more expensive and in many cases limited in duration.

Rental contracts in old buildings, i.e., in buildings constructed before 1946, are subject to the Tenancy Law (MRG) in Vienna. The law contains tenancy regulations that mostly serve to protect tenants. Among other things, the amount of rent is regulated. Rental contracts for apartments in new buildings, on the other hand, are only partially covered by the MRG, and many provisions for tenant protection do not apply or only apply to a limited extent.

One Fifth of Vienna's Rental Apartments Are in Old Buildings

The study was created based on the purchase price collection of the city of Vienna, which is a database of property transactions maintained since 1986. According to this, there are around 20,000 old rental buildings in Vienna, and between 2000 and 2022, around 6,400 of these buildings changed owners, with some buildings being sold multiple times. About one fifth of the 1.07 million apartments in Vienna are in old rental buildings. At the time of the transaction, almost all of the sold buildings, 97 percent, were occupied.

The AK offers tenants a free check of their old building rents. Besides advice and support, a revision of the tenancy law is necessary. According to this, among other things, the surcharges must be newly regulated and capped at 25 percent, and the AK also proposes that all buildings older than 30 years should be considered old buildings. The AK also sees fixed-term rental contracts as a problem, as tenants in fixed-term contracts with excessively high rents do not dare to sue their landlords. The interest group also demands higher penalties for rent gouging.

Real Estate Industry Now Sees Market "in Calm Waters"

The Austrian Association of Real Estate (ÖVI) sees the Vienna tenement market as being "in calm waters" again, with the price level having reached a historic high in 2022 and since then having fallen by a good third, the association wrote in a release on Monday. According to this, there is legal uncertainty due to "often excessive class action lawsuits by the AK," which make it difficult to formulate rental contracts that would last for several years. Short-term rental contracts are therefore "the logical consequence." The association calls for clarification of the legal framework for value protection clauses in rental contracts, the development of statutory standard rental contracts for various applications, and an evaluation of the benchmark system.

(APA/Red)

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