November 30, 2023 2:03 am

The real estate market is facing a toxic mix of factors that could lead to more bankruptcies in the future, according to Gerhard Weinhofer, managing director of Creditreform Austria. Weinhofer believes that rising interest rates, lower real estate prices, and higher construction costs are all contributing to the industry’s difficulties. He also feels that the long-standing zero-interest policy has played a role in the current situation by allowing for cheap financing of real estate projects and triggering a boom in the market.

Weinhofer stated that the cheap money for two decades has acted like a drug and cannot be left abruptly. The long-term upswing in the sector is over, and rising interest rates have made loans expensive, making project financing noticeably more difficult. This has put consumers under increasing pressure, many of whom can no longer afford to own their own home.

The impacts of these developments are felt on rents and the construction sector, with demand for property increasing while supply remains relatively stable. This has led to many consumers being pushed into the rental market, which is likely to further increase rental prices, especially for apartments that are not subsidized.

Weinhofer does not expect an acute housing shortage but believes that the situation will get worse, particularly in eastern Austria where population growth is occurring. The turbulence in the real estate sector is already contributing to an increase in bankruptcies among domestic construction companies. According to a recent analysis by credit insurer Acredia, 667 domestic construction companies filed for bankruptcy from January to September 2013, which represents a 16% increase compared to the same period last year.

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