What role do investors play

What role do investors play in residential construction in Vienna?

According to the property developer database Exploreal, around 18,000 residential units should be completed in Vienna this year, and even a little more in the coming year. This housing boom is primarily being driven by commercial property developers. Non-profit organizations will complete more than 8,000 residential units in Vienna this year, but commercial property developers will be responsible for almost two thirds of residential production from 2017 to 2021.

In 2021, it should then be so far that commercial property developers will be producing more rental apartments than owner-occupied apartments for the first time. The latter have always fluctuated between 5000 and 7000 units in recent years, but the number of rental units has gradually increased because investors have discovered the Vienna market - this has been described several times on these pages. And of course that not only applies to entire residential complexes that are increasingly being acquired by institutional investors, but also to condominiums that are frequently bought by investors. Even non-profit property developers are not immune to this when they build privately financed condominiums.

Results of a diploma thesis

On the demand side, yield is often the top priority on the Viennese housing market at the moment. But how much has the supply side been "financed", i.e. to what extent are financial investors involved in Viennese developers? Exploreal employee Matthias Tischler took a look at it for his diploma thesis at the Vienna University of Technology. He mainly proceeded on the basis of three criteria: industry affiliation (i.e. whether the company belongs directly or indirectly to the financial sector, such as banks or insurance companies), stock exchange listing and the ratio of financial income to cash flow.

All 441 property developers who developed projects in Vienna between 2017 and 2021, both commercial and non-profit, were included in the study. Of these, 101 property developers were classified as clearly "financed", and another 91 as "more financially-minded". In total, a little less than half, but these 43 percent were responsible for no less than 75 percent of all residential units in this period. This is due to the fact that the property developers classified as "financed" usually implement much larger projects, with an average of 85 residential units. The 249 property developers (57 percent), for whom no connections to the financial sector could be proven, build an average of only 40 residential units per project.

Limited profit-oriented

It is interesting that the non-profit property developers also have very strong connections to the financial market. Specifically, a little more than half of the 51 non-profit organizations that implement projects in Vienna between 2017 and 2021, namely 26, are directly attributable to the financial sector in terms of their ownership structure. And these are responsible for 55 percent of the residential units. However, and Tischler also emphasizes this in his study: it is well known that non-profit property developers are only allowed to operate in a very limited, profit-oriented manner. (Martin Putschögl, November 29, 2020)