As of January 1, 2022 the Kreditinstitute-Immobilienfinanzierungsmaßnahmen-Verordnung (KIM-VO) came into effect, introducing new requirements for banks involved in real estate financing. The KIM-VO regulations applied to both commercial banks and specialized financial institutions. While the goal of the regulation was to stabilize the banking sector, its implementation significantly restricted access to mortgage loans, leading to a slowdown in Austria’s real estate market.
What Are the Requirements for Getting a Real Estate Loan?
According to KIM-VO borrowers had to meet several key conditions to obtain a mortgage:
- Mandatory Independent Property Valuation – Banks were required to involve certified appraisers to determine the market value of the property. This measure helped minimize the risks of overvalued collateral and ensure transaction transparency.
- Loan-to-Value (LTV) Limit – Borrowers had to contribute at least 20% of the property’s value from their own funds. However, in practice, banks often required 25% to 40% as a down payment, especially if the borrower had unstable income or a weak credit history.
- Comprehensive Financial Review of the Borrower – Banks assessed the borrower’s income and debt levels to ensure that monthly payments did not exceed 40% of net household income. For example, if a borrower had a monthly net income of €4,000 and existing debt obligations of €1,000 the bank calculated whether their financial situation was stable enough to take on additional credit.
How Much Personal Capital Is Required?
Under KIM-VO buyers had to contribute at least 20% of the property’s value. Examples:
- Example 1:
- Apartment price: €500,000.
- Bank finances 80% of the value (€400,000).
- Borrower must contribute €100,000 of their own funds.
- Example 2:
- Purchase of a commercial property for €1 million.
- Bank finances 70% of the value (€700,000).
- The buyer must contribute €300,000 of their own funds.
How Did Mortgage Lending Decline After KIM-VO Was Introduced?
The introduction of stricter lending rules by the Regulation has negatively affected the lending situation for both private and commercial real estate projects in Austria.
In particular, the Austrian National Bank regularly publishes reports on the state of lending and the mortgage market, including data on the volume of new mortgage loans and factors affecting this market. For example, in Financial Stability Report 44 (November 2022) and Financial Stability Report 45 (June 2023), the National Bank explicitly indicated that the volume of new mortgage loans in the second half of 2022 decreased by approximately 18-23% compared to previous periods, after the stricter KIM-VO rules came into effect.
The decrease in the volume of loans issued for the period 2020-2024 is clearly visible in the graph.
What Will Change After KIM-VO Ends in 2025?
After June 30, 2025, mortgage conditions will be simplified:
- Lower down payment requirements – Banks will be able to issue more loans with smaller initial deposits.
- Simplified borrower evaluation process – Getting a mortgage will be easier even for those with slightly higher debt ratios.
- Looser collateral requirements – Developers will be able to secure more funding.
Potential Risks After KIM-VO Is Lifted
- Increase in Defaults – Easier loan access may lead to a rise in non-performing loans.
- Decline in Credit Portfolio Quality – Some overvalued properties may be used as collateral.
- Risk of Market Overheating – Increased lending activity may drive real estate prices too high.
- Reduced Market Transparency – Lower regulatory control may undermine investor confidence.
Conclusion
The repeal of KIM-VO will simplify the mortgage application process and open new opportunities for property buyers in Austria. However, it will also introduce risks for the banking sector, such as higher debt exposure and potential market overheating. Overall, 2025 will be a turning point for Austria’s real estate market. Read about other trends in the real estate market in our article.
