Austria’s real estate market in 2025 is navigating one of its most challenging periods in decades. Rising interest rates of the past years, construction cost inflation, and tighter financing conditions have triggered a wave of insolvencies and reshaped transaction dynamics. At the same time, landmark deals and sweeping legal reforms are reshaping deal structures.
Market Developments: Distress and Selective Investment
The collapse of Signa, Austria’s largest privately-owned real estate group, remains the defining event. With liabilities exceeding EUR 12 billion, Signa’s insolvency has led to the sale of prime assets, including luxury retail spaces in Vienna’s Goldenes Quartier. However, one of the most anticipated transactions – the sale of the Park Hyatt Vienna – was aborted a few weeks ago, despite months of negotiations with a Spanish investor. The property, initially expected to fetch EUR 350 million, remains unsold, highlighting the challenges even trophy assets face in today’s market.
Beyond Signa, Austria is experiencing a broader insolvency wave. Real estate-related bankruptcies have surged by over 60% year-on-year, driven by project developers under severe cost pressure and limited access to credit. Notable cases include the owners of the Grand Hotel Vienna and the Palais Corso – a shopping mall in the inner city of Vienna, Kika/Leiner – a major retail and property operator, Fisker GmbH, and Pierer Industrie AG.
Despite these headwinds, selective transactions persist. International investors remain interested in particular in Austrian hospitality and resort assets, particularly in Vienna, Tyrol, and Salzburg, where tourism continues to outperform. However, pricing expectations have adjusted downward, and liquidity is concentrated in distressed opportunities rather than core assets.
Legal Landscape: RETT Reform Redefines Share Deals
Amid financial turbulence, Austria’s legal framework for property transactions is undergoing its most significant overhaul in decades. The Budget Accompanying Act 2025 introduces sweeping changes to the Real Estate Transfer Tax (RETT) regime, aimed at closing loopholes in share-deal structures.
Among the key reforms, RETT now applies when 75% of shares in a property-owning entity change hands within a seven-year observation period, down from the previous 95% threshold and five-year period. At the same time, for the first time, indirect share transfers – such as changes at parent or grandparent company level – are taxable. Ownership stakes are calculated multiplicatively along the chain. Furthermore, there is a new definition for a “Real Estate Company” for entities primarily engaged in real estate activities, now subject to stricter rules. For these, the fair market value becomes the tax base, and the RETT rate rises to 3.5%, compared to the previous 0.5% for share deals.
These changes represent a paradigm shift. Share deals, once a favored structure for minimizing tax exposure, will now attract substantially higher costs and compliance obligations. Investors must reassess transaction models and reporting processes under the new regime.
Rent Control: Intensifying Political Debate
Vienna’s social housing model continues to buffer affordability, but private-sector rents in urban centers are climbing sharply amid a shortage of new construction. Political pressure is mounting for stricter caps, though industry voices warn that excessive regulation could deter investment and exacerbate housing shortages.
A new law is in the pipeline aimed at curbing automatic inflation-linked rent hikes. Under the new rules, landlords will no longer be able to fully pass on inflation to tenants: if annual inflation exceeds 3%, rents can only increase by the full 3% plus half of the excess inflation (e.g., at 4.2% inflation, rents rise by 3.6%). For older regulated apartments, a rent freeze applies in 2025, followed by capped increases of 1% in 2026 and 2% in 2027. From 2028 onward, all rents – including previously unregulated ones – shall be subject to this formula, effectively introducing a nationwide cap on indexation. Additionally, the minimum lease term will be extended from three to five years.
Outlook: Navigating Complexity and Opportunity
Austria’s real estate market in 2025 is defined by contrasts: insolvencies and aborted deals coexist with resilient segments like tourism-driven hospitality. Legal reforms, particularly the RETT overhaul, demand meticulous tax planning and structural adjustments. Meanwhile, political discourse on rent control adds another layer of complexity for residential investors.
For stakeholders, agility is key: navigating regulatory change, identifying value in distress, and anticipating policy shifts will define success in Austria’s evolving real estate landscape.
By Birgit Kraml, Partner, DLA Piper Austria
This article was originally published in Issue 12.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
