Gerhard Weinhofer, managing director of the creditor protection association Creditreform Austria, is convinced that bankruptcies in the real estate industry will increase. Rising interest rates, lower real estate prices and higher construction costs have led to an unfavorable market for construction companies and project developers in the real estate industry. Weinhofer sees a “toxic mix” in the market that will soon lead to further upheavals and bankruptcies. “Insolvencies will certainly increase in the real estate sector,” he said in an interview with the APA. According to Weinhofer, it is not just the economic environment that is responsible for the difficulties in the industry. The long-standing zero interest policy made it possible to finance real estate projects cheaply and triggered a boom in the market and the associated high profits. The question therefore arises as to whether companies have built up enough reserves from their profits for the turnaround. “The two decades of cheap money were like a drug. And you can’t get off a drug overnight,” Weinhofer said.
In any case, the long-term upswing in the sector is over – the interest rate turnaround initiated by the European Central Bank (ECB) has made loans more expensive and thus made project financing noticeably more difficult. This also puts consumers under increasing pressure. Many can no longer afford to own their own home, which subsequently leads to difficulties for companies in the construction sector, which are increasingly stuck with their properties or have to sell at low prices. Rents also have a dampening effect on companies. These have increased, but only slightly in relation to the interest rate level, explained the creditor protector. One effect of these developments: The majority of consumers are being pushed into the rental market, which is likely to further increase rental prices, especially for privately financed, i.e. not subsidized, apartments. Because the demand for apartments is increasing, but the supply remains more or less the same.
Weinhofer does not therefore expect an acute housing shortage. However, the situation will get worse. “I think we are on the way to an even more volatile housing market because there is less new construction going on, but we have a growing population, especially in eastern Austria.” The plan to renovate apartments in a climate-friendly manner is also difficult to implement in light of current developments, for example in older buildings in Vienna. In a phase of rising costs, there is a lack of money and available staff. “How is it supposed to make hundreds of thousands of such residential units climate-friendly in a relatively short period of time?” asked Weinhofer. “And I’m not even talking about the fact that at some point the war in Ukraine will be over and the European construction industry will throw itself into Ukraine,” he added. If you follow a current analysis by the credit insurer Acredia, the turbulence in the real estate sector is already manifesting itself in the number of bankruptcies. From January to September 2023, 667 domestic construction companies filed for bankruptcy, 16 percent more than in the same period last year.