Should I buy a Property in Austria?
There are many benefits to buying a property in Austria, but as in any country there are always some downsides. Have a question about buying property email us.
We are property advisors with over 20 years experience.
We are property advisors with over 20 years experience in the Austrian property market and all the regulations related to property. Stay safe in a purchase, get advice.
Check out our ‘Why buy in Austria’ info page to get an idea.
Also, our Your Questions answered page which are various questions from clients buying a property or have already bought.
Austria Property buying advice news:
Buying Updates after 1st August 2022
Higher hurdles for home loans: What has applied since August 2022?
Stricter criteria for granting private property/real estate loans will come into force. The banks’ compliance with the new standards will be monitored in many ways.
From 1 August 2022, it has become more difficult for some families to obtain a loan to build a house or buy a flat. As then the newly issued Credit Institutions Real Estate Financing Measures Ordinance (KIM-V) of the Financial Market Authority will come into force. There will be amendment to the Assets, Earnings and Risk Disclosure.
Protecting the borrower
The FMA thus follows the recommendations of the Financial Market Stability Board (FMSG) to reduce and limit risks in the financing of residential real estate. As reported, the Oesterreichische Nationalbank (OeNB) has been warning for some time. Due to rising real estate prices as well as the turnaround in interest rates that more and more borrowers could get into payment difficulties. This is because they have taken on too much debt and the income is too low for the future interest burden.
Another risk factor in the construction of single-family homes is the rising cost of construction, which can make financing plans obsolete. The aim of the new measures is to adequately contain default risks, to upgrade risk management in credit institutions and to avoid conflicts of interest.
At least 20 percent own funds
The new minimum lending standards apply to private individuals who require financing for the construction or acquisition of real estate for residential purposes. The maximum loan term will be limited to 35 years. Furthermore, credit institutions may only mortgage a maximum of 90 percent of the total financing volume through registration in the land register.
The borrower’s own funds ratio must be at least 20 percent. Including the buying costs of the purchase price plus ancillary purchase fees of up to ten percent. In other words if a property price is €250,000, then the 10% buying costs are €25,000 this gives a total purchase of €275,000, so the 20% minimum would be 54,000. Furthermore, the total monthly amount of loan payments may not exceed 40 percent of the total household income.
Buying a property in Austria – Compliance
Old financing contracts concluded before 1 August 22 are not covered by the new rules. Changes to existing contracts are not affected. Such as with regard to the purpose of the financing, the interest rate, the term or the repayment schedule to ensure repayment. If the loan amount was increased after 1 August 22, only the amount exceeding the original volume must meet the new minimum criteria.
Compliance with the new requirements is the responsibility of banking supervision, which is divided into internal control by the management and the supervisory board of the respective bank and external control by auditors and supervisory bodies such as the FMA and the OeNB.
Before disbursing a loan amount, the credit institution has to check again whether the internal formal and material verification steps have been set and complied with.
Compliance
Extensive control and safety precautions for the protection of creditors have been anchored, above all through the FMA’s comprehensive participation and co-decision-making possibilities in internal and external audits.
As a result of the new caps, banks will have to refrain from certain lending operations, and for some families the dream of owning a home will become a distant prospect. However, there are ways to realise a housing acquisition even if not all criteria are met. On the one hand, additional income such as rent or lease can increase household income.
Update after Brexit: 1st January 2021
Brexit changed the status of UK citizens to 3rd country like the USA, and this in turn affected property regulations for who could buy in Austria and also the requirements for most Non EU citizens..
Buying a property in Austria: Great Britain is now considered a 3rd country and is being treated as such. How will this affect owners & future UK buyers?
First and foremost, the immediate effect is on current owners. Previously Austrian property owners could stay for up to 6 months in a 12 month period.
Now with the new regulations, this has changed to 90 days stay in a 180 day period. Unlike Spain which has many long term British. With Austria this will not unduly affect many owners as most do not retire to Austria and they would normally spread the use of their property through the year.
For future buyers, this needs to be taken into consideration, but again should not unduly affect most interested buyers. What has affected the UK buyer is the lack of mortgage possibilities. This is because the new banking regulations state that for a mortgage or other finance, a borrower must have an income in euros!
In these rapidly changing times, if considering to buy an Austrian property we would suggest looking at managed chalets, as these can give the income and also own use with less problems as a third country buyer.
Buying a property in Austria – The buying process
Buying a property in Austria: Once you have found the property of your dreams, be it a small studio apartment or a 6 bed ski chalet on a mountain top, the next step is to make a written offer. But we would advise all potential buyers to open a Foreign Currency account and an Austrian bank account as first steps. These will be needed for transfers of funds and of course to make payments for buying and also in the future for the running costs.
Our property buying advice: This can be difficult in another language and culture, so it is a good idea to take some advice from ourselves or one of our Austrian property colleagues.
We do offer a Skype professional chat advice service . With a 30 minute chat you can get most of the required advice on how to proceed with a purchase.
Many agents, like Amazing Austria Property, speak good English and they are very experienced. They are in a position to know what the seller might be willing to accept from a sale without insulting the seller with a low offer. You need to also discuss anything else such as furniture or fittings that might be included in the sale. It is quite common for the furniture to be included when buying a holiday apartment. This value of furniture would be kept separate for stamp duty purposes. Our property buying advice: Always make sure you check this at the contract stage.
The offer
Buying a property in Austria. When you are ready to make an offer, this is put in writing and sent to the seller. Ourselves or the agent can advise on this offer document for you. On it will be itemised all the costs involved in buying the property such as legal fees, land registry costs, agents fees, stamp duty etc.
This usually amounts up to approx 11% of the purchase price and is an additional cost to the property price. It is wise to keep this in mind when viewing properties. So, if you are buying a property for 100,000 euros you need to allow at least an extra 11,000 euros to cover all the costs involved.
Document
The agent sends the offer document to the seller. If the seller accepts your offer they would countersign it. The seller is given a fixed period to accept or decline your offer price.
Once the document is countersigned, you can take it that the property is yours and you have a legally binding contract! Our property buying advice: Do make sure you have your finance in place before you make a legal offer in writing, as once accepted you are committed.
A completion date is agreed between the seller and buyer for the purchase, then you must send the total amount, including all the costs, to the Notar or Solicitor. It is best to do this a few weeks before completion. This will allow time in case of any banking delays.
An Offer verbally?
Potential buyers should be careful to express possible uncertainties in their intention to purchase. As an oral contract – even with concluding behaviour – can be binding! Make sure that you state that you are NOT making a legally binding offer.
Preliminary agreement
A preliminary agreement is not common in Austria as an oral contract based on consensuality is already binding. If a preliminary agreement is made, the buyer keeps his claim on contracting only for a year.
Contact us to ask questions or for advice, we have over 20 years experience!
At the Notar office
What to expect at the Notar office. Generally, both the buyer and the seller attend the Notar office, then when all is explained to both parties about their legal responibilities, they sign the actual Purchase contract.
This contract is different to the Purchase offer, which is really to get the legal process started.
Both the buyer and seller can sign separately, this is normal if the buyer needs to come from another country. But, all the finances need to be in place with the Notar before the seller will sign. Then he/she has the security of knowing that the Notar has the funds to pay for the property. This is where it makes sense to open a Foreign Currency account. As then you get the best exchange rates, and you also have the facility to transfer monies on a regular basis for any local property running costs.
The Notar will normally set up two escrow accounts for the buyer. One for the payment of the purchase price and one for the payment of costs incurred, such as taxes and his and agent fees.
Notar costs are generally 2% of the purchase price. He/she will invoice you when the property is registered in your name and all legal work has been completed.
Currency Exchange at the best rates for your property purchase
Completion
Buying a property in Austria:
In order to officialise the purchase of a property in Austria, there are two steps.
One is the buying contract, called “Titel”.
The second part is the entry into the land register which is known as “Modus”. This is also the point when the payment for the transaction is usually due. Therefore, a written contract with verified signatures is necessary at this point.
A Notary will draw up the sales contract on behalf of both parties. Please note, it is usual practice in Austria that the Notary acts for both parties and is seen legally as an intermediary for both buyer and seller.
It is advised for a foreign investor to hand over the payment to either a lawyer who is a member of the Treuhandbuch, a cooperation of Austrian lawyers, or to the custody account of a notary.
The money will be handed over to the seller once the entry into the land registry has been made, unless agreed otherwise.
Cancellation
Please note that the cancellation of a deal without any costs is not possible in Austria. If investors need the option to re-think the decision, then the possibility of cancellation or any precedent conditions should be included in the buying contract.
The whole purchase process may take several months until the property is legally transferred to the new owner.
If you would like to set up a currency account for money transfer then click on the ‘Free currency account’ or also at the bottom of this page. You then have access to all the information that you need to make sure you get the best exchange rate and also minimise banking costs.
This information is a guide only and is not comprehensive. You are advised to take legal advice before making any purchase. If you have any questions about a purchase, please email us. Our own registered Austrian Notar will gladly answer any queries.
So, maybe it is time to celebrate and have a toast with your favourite drink.
Do I need a Valuation?
Buying a property in Austria. Buying Advice:
Most Properties here are built to the highest standards, even older ones. There are generally no cowboy builders, as all are government licensed. So you can assume that a new property or renovation is in good structural order and can rely on the advice of the agent.
For apartments; as the state of the building is the responsibility of the managing company, all apartments are structually sound. It is only the interiors that might need refurbished, so generally a survey is not required.
For older properties: You can request a survey known as a Gutachten, if you wish. The Banks and mortgage providers have a ‘Property Price Book’ that they work from. This gives them a pretty good idea if the property is worth the price you are paying, as they would not agree to a high level of financing.
After buying there are many questions about property and living in Austria.
Check out our Your Questions answered page.