COVID-19 impacts on the Austrian Real Estate Market - EY Austria. 2020 The better the question. The better the answer. The better the world works.
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COVID-19 impacts on the
Austrian Real Estate
Market
EY Austria. 2020
The better the question. The better the answer.
The better the world works.
Current situation in Austria: in the eye of the storm
Due to the government restrictions caused by the Corona Pandemic, Austria is already
facing a profoundly changed economic situation. Company closures and thousands of new
unemployed will lead to a recession in 2020.
In a time where new or stricter measures are being taken by our government every hour to
contain the virus, it is hardly possible to assess the scale of the impact. But one thing is
certain, the effects will also have a short-, mid- and long term impact on the Austrian Real
Estate Market,
► as the Austrian Traded Index (ATX) has recorded strong fluctuations with historical lows
and brings uncertainties to potential investors,
► as central banks are cutting key interests rates even more sharply and the mortgage
rates increase,
► as human needs, in particular social activities, have been shifted, the use of properties
changed, and
► as the level and continuity of the rent are essential components of the market value of a
property.
Legal principles related to tenancies for commercial activities
► The application of paragraphs §1104 and §1105 ABGB (Austrian Civil Code) can lead
to a reduction in rent due to the unusability of the rented property.
Page 2 April 2020What does it mean for our clients?
Valuation Market Transaction / M&A Transformation / Strategy Tax / Legal
► Is there a correction to be ► What will happen to forward ► How much office space do we ► Is a legal adjustment for rental
expected? deal negotiations started still need as a company? contracts and thus a risk for
before the crisis? the loss or delay of rental
► What are the standard, best ► How will home office affect
income likely? What does this
and worst case scenarios? ► Might residential investment company costs in the long
mean for stamp duties?
properties also be affected by run?
► Are real estate investment ► What are the liquidity
price corrections or could they ► What position will Corporate
portfolios immediately enhancements for taxes due,
become even more Real Estate play in the future
devalued? what are the impacts on
expensive? within the corporate group?
► Is the market risk immediately compliance with deadlines for
► Is the real estate investment ► Will office space requirements payments and tax returns?
reflected in a premium to the
market still a (relatively) safe be made completely flexible in
discount rate? ► How can losses incurred be
haven for institutional capital the future?
► How will the key interest rate or do the revaluation gains of used in a tax-efficient way?
develop in the near future? recent years have to be ► Do we have cybersecurity, etc.
► What mitigators will be
realized as quickly as possible for home office in place?
► By what percentage could the introduced in material tax law?
vacancy rate increase? through sales? ► How is our workplace-
► How is a possible valuation
► Do investors still have management organized?
► What is the impact of the impact dealt with from a tax
sensitivity analysis? sufficient liquidity for new ► What kind of costs need to be and regulatory perspective?
investments? optimized on the mid- and
► What is the difference by asset ► Are tenants entitled to rent
long-term?
class? reductions?
Page 3 April 2020Impact on specific real estate sectors
Hospitality Market Retail Market Office / Industrial Market
► The Hospitality Market is so far one of the ► The Retail Market is mainly closed down ► Office rents are likely to come under
most affected asset class with the exception of system-relevant increasing pressure due to the
► After the cloures for gastronomy all institutions such as grocery stores, worsening economic outlook
pharmacies and banks; small shops
accommodation facilities such as hotels ► If the forced home office experiment is
(Impact on specific real estate sectors
Housing Market Construction Industry Transaction- and Investment Market
► The housing market is considered to be ► Working on construction sites is ► For some investors, the sharp
relatively crisis-resistant, as demand for permitted again starting 30.3. - with devaluation of shares leads to an
housing is less dependent on the compliance with the prescribed health absolute increase in existing real
economic situation regulations from the government and estate quotas and thus, in some cases,
WKÖ the target quotas might be exceeded
► Therefore long-term impact is expected to
be less than in the commercial real estate ► Shortfall of work as a result of lack of ► For individual investors the change of
market skilled workers and travel restictions from the quota could lead to investment
CEE stops or even sales, or require an
► Non-profit housing companies and public
homeowners are already thinking about ► Downtime on the construction site, adjustment of the investment strategy
rent reductions delayed commissioning and unresolved ► Already signed deals are completed,
► Under the given restrictions, fewer site claim situations entail the risk of planned investments are more liley to
protracted legal disputes be postponed
inspections and changes of ownership
are currently expected ► Numerous uncertainties and dangers due ► Banks operate a tougher risk
to the imminent failure to meet project management with a forecast of 3-6
► The interest in luxury properties may be
goals (budgets, deadlines, qualities) on months. They evaluate business
low in the short and medium term due to
both sides (client and construction dependencies with foreign countries; a
the slump in the stock market
companies/GUs) national business model is classified as
► The continued low interest rates ensure a risk-minimizing
► Various tendered construction projects
steady demand for home ownership
are currently being cancelled or ► Increased uncertainity in Foreward
► Deferements of payment given by banks postponed Deals (regardless of the asset class),
as rental income is difficult to estimate
Page 5 April 2020How we can help you?
Strategy
and Assurance Tax EY Law
The Austrian Real
Estate Team
Transactions
Eva-Maria Berchtold Alexander Wlasto Andreas Sauer Stephan Größ
Partner Partner Partner Partner EY Law - Pelzmann Gall
An interdisciplinary Eva-Maria.Berchtold@at.ey.com Alexander.Wlasto@at.ey.com Andreas.Sauer@at.ey.com Größ Rechtsanwälte GmbH
Stephan.Groess@eylaw.at
team of
60
experts
Extract from our Service Offer:
► Strategy and Transactions (S&T) ► Workplace Transformation
Composed of the areas of ► Real Estate Restructuring incl. Tax and Legal aspects ► Sell-Side M&A: Structuring and Execution of Transactions
our core competences to (Asset & Share-Deals)
► Portfolio Analysis and Scenario Planning
generate the best
► Technical Building and Cost Analysis ► Portfolio Strategies and Optimization
solutions for you!
► Market Analysis and Studies ► Capital and Debt Advisory
► Real Estate Tax advice
► Feasibility Studies
► Real Estate Legal advice
► Financial Due Diligence Support
► Commercial Due Diligence
► Sale-and-Leaseback Transactions, Asset Swaps,
Securitizations ► Real Estate Valuation
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