• Sat. Dec 9th, 2023

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


Nov 20, 2023

The managing director of the creditor protection association Creditreform Austria, Gerhard Weinhofer, believes that bankruptcies in the real estate industry will continue to rise. This is due to a combination of factors, including rising interest rates, lower real estate prices, and higher construction costs. Weinhofer believes that these challenges are not solely caused by the current economic environment.

He argues that the long-standing zero-interest policy played a significant role in creating the boom in the market and resulting in high profits for companies. However, this cheap financing has left many firms with insufficient reserves and unable to weather the current downturn. Weinhofer warns that the sudden end of this policy could cause further upheavals and bankruptcies in the industry.

The situation has put pressure on consumers as well, many of whom can no longer afford to own their own homes due to rising interest rates and other financial challenges. This has led to an increase in demand for rental properties while supply remains relatively stagnant. The majority of consumers are being forced into renting options, which are likely to lead to further increases in rental prices, particularly for apartments that are not subsidized.

While Weinhofer does not expect an acute housing shortage, he believes that the situation will continue to deteriorate, particularly in eastern Austria where population growth is occurring at a faster rate than other regions. He expects an increase in bankruptcies among domestic construction companies as a result of these challenges. In fact, according to a recent analysis by credit insurer Acredia from January to September 2013 alone 667 domestic construction companies filed for bankruptcy which represents a 16% increase compared to same period last year.

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