AUSTRIA - Prices for second-hand flats in Vienna increased by almost 50% on average over the last five years, academic research shows.

In his biannual real estate index report, university professor Wolfgang Feilmayr, from the Technical University in Vienna, calculated a median price level for used flats in Vienna of almost €2,800 per square meter at the end of the first quarter compared with just over €2,000 per square meter five years ago.

The highest prices by far are paid in the inner city at more than €6,500, while the lowest can be found in the Simmering district at €1,750.

For new flats, the price increase was less steep (from €3,400 to just over €4,000), but prices for empty spaces of land with a permission to build a residential house in the Austrian capital surged by almost 200%, Feilmayr said.

Franz Schwarz, a realtor representing the real estate agency association AIB, spoke of a "dramatic development in the real estate sector", but added that this price surge was evident only in Vienna, the outskirts of the federal capital, in provincial capitals and tourist centres like skiing resorts.

He pointed out that, in Vienna, offices were being converted into flats and that houses "still in good condition" were being demolished to create new space.

In peripheral regions, on the other hand, Schwarz pointed to a "flight" of investors and falling prices.

He explained that the price surge was well above that of the inflation rate over the period and that rental prices had not increased as much since 2007.

Despite the price surge, Schwarz and Feilmayr do not see a bubble forming in Vienna based on the fact most of the purchases are capital-only, with no bank loans.

"People are afraid the money in their pockets might soon be worth less, and other forms of investments are deemed insecure or are returning too little, so they go into real estate," Schwarz said.

He added that most of the purchases were being made as investments rather than to improve one's own living conditions.

Feilmayr noted that fewer project completions, as well as more capital inflows, might drive the prices further up, but Schwarz expects them to flatten out once a certain affordability cap is reached.

"Collectors' prices might have no limit when it comes to Van Goghs, but not in the real estate sector," Schwarz said.

For the office rental sector, the data shows a steep increase over the last three quarters after two years of stagnation.