The anatomy of urban real estate prices – Comparative analysis of fundamentals and institutions in Linz and Salzburg

Abstract

Rising property and rental prices are a key social problem in many cities in Europe, including Austria. In the meantime, beside metropolises, small and medium-sized cities are also affected by this development. Using the cities of Linz and Salzburg as examples, we show the specific real estate price developments and analyse the interplay of these price developments with supply and demand. Firstly, we argue that the fundamental socioeconomic conditions and processes can explain the actual price development only limitedly, but the specific institutional conditions are of major relevance. Thus, real estate prices in cities are both an expression of the general development and of the specific urban conditions. Moreover, we show that the regional policy responses to price increases are similar and do not counter the trend of price increases with effective measures. Our methodology is based on a comparative analysis of selected indicators of supply and demand trends as well as of property and rental prices. We identify the specific developments in Linz and Salzburg and compare them with the regional price trends. From this we deduce that the explanatory content of these fundamental data is inadequate. By analysing the institutional changes in the field of housing policy in both cities, we show that the different price trends are also an expression of these specific urban institutional conditions.