• Wed. Dec 6th, 2023

Austria’s Construction Industry Braces for Increased Bankruptcies due to Addiction to Cheap Money


Nov 20, 2023

The real estate market is facing a toxic mix of challenges, including rising interest rates, lower prices, and higher construction costs. As managing director of the creditor protection association Creditreform Austria, Gerhard Weinhofer believes that these factors may lead to further upheavals and bankruptcies in the industry. He argues that while the economic environment is responsible for some of the difficulties, it was also influenced by long-standing zero-interest policies that allowed for cheap financing of real estate projects and sparked a boom in the market.

Weinhofer notes that cheap money has been like a drug and cannot be abruptly stopped. He believes that the long-term upswing in the sector is over, and rising interest rates have made loans expensive. This has put consumers under increasing pressure and many can no longer afford to own their own homes. The impact on rents and the construction sector has increased demand for property while supply remains relatively stable, pushing more consumers into the rental market. This is likely to further increase rental prices, especially for apartments not subsidized.

While Weinhofer does not expect an acute housing shortage, he believes that the situation will get worse, particularly in eastern Austria where population growth is occurring. The turbulence in the real estate sector has already led 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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