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Investment climate

What is the general climate of real estate investment in your jurisdiction?

The demand for Austrian real estate is increasing due to the country’s generally stable political and economic framework. This increase in demand is fostered by extremely low interest rates and available financing. Even though real estate prices have increased significantly over the past years, Austria is still considered to be a key place for non-speculative real estate investments. In particular, the demographic development and expected urban conurbation (with Vienna having been consistently ranked as one of the world’s best cities to live in) has resulted in demand exceeding availability. As a consequence, real estate investments also appear attractive to foreign institutional investors. 


Who are the most common investors in real estate?

Local investors accounted for a major part of Austrian real estate investment in 2016. This trend shifted towards international investors in 2017, with German investors accounting for a major share (51 %) of Austrian real estate investment, followed by Austrian investors (31 %) and other international investors (18 %). In 2017 significant direct investments by Asian investors were registered in Austria for the first time, a trend expected to continue over the next few years.

Are there any restrictions on foreign investment in real estate?

Under the land transfer regulations, the transfer of property rights to foreign investors may require approval. In this respect, each Austrian federal province has its own legal framework defining the applicable restrictions and approval process. If the necessary approval is not obtained, a transfer of ownership cannot be registered in the respective land register and the contemplated transaction cannot be carried out (as real estate ownership is generally obtained only through registration of the new owner in the land register). Persons and corporate bodies of EU member states or signatory parties to the European Economic Area agreement have the same status as domestic persons and corporate bodies.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The structuring of an investment for the acquisition of property should be based on various economic, fiscal and legal considerations, whereby investments may generally be structured as asset or share deals. The advantage of an asset deal is that the investor may be better aware of the transaction scope (particularly in relation to potential tax or other liabilities of a pre-existing company), whereas a share deal is generally tax advantageous because – with correct structuring – real estate transfer tax can be avoided. This is possible because whereas an asset deal generally triggers Austrian real estate transfer tax at a rate of 3.5% of the consideration, only a transfer of at least 95% of the shares in a company holding Austrian real estate is subject to real estate transfer tax. In light of this, it has become common practice to implement a share deal structure with two acquiring entities that must each acquire more than 5% in the target company (eg, a 94%/6% structure). Further, a share deal will not result in a change in the ownership of the property itself, which means that registration fees of 1.1% of the market value of the real estate may also be avoided.

The following legal forms are typically used as real estate holding entities and acquisition vehicles:

  • Limited liability companies (GmbH) offer flexibility and can be established by one or more individuals, as well as legal entities, which are generally not personally liable for the company’s liabilities. The minimum share capital amount is €35,000, of which at least €17,500 must be paid in. Since 2014 there has been an option to limit share capital to €10,000 (of which at least €5,000 must be contributed) for up to 10 years.
  • Joint stock corporations (AG) are limited liability entities, the shareholders of which participate in the share capital divided into shares by means of contributions, without being personally liable for the company’s liabilities. The minimum capital stock is €70,000. The ongoing legal structure costs of an AG are higher than for a GmbH. In addition, they offer less flexibility – except in relation to share transfers.
  • Partnerships can be incorporated by at least two parties as a general partnership (OG) or a limited partnership (KG). The difference between an OG and a KG is that in a KG, the partners – with the exception of at least one – have limited liability, whereas all partners of an OG are personally fully liable. In addition to the flexibility of partnerships (which is even higher than that of a limited liability company), their main advantage is tax transparency, which allows the direct allocation of profits and losses to partners for tax purposes.

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