The Austrian capital of Vienna may not be the obvious locations for property investment but new research suggests it is attracting a new type of buyer particularly interested in the pied-a-terre market.

The interest from real estate investors is due to attractive yields on offer in key up and coming districts in the city which is also a UNESCO site and home to numerous international organisations including the UN, and OPEC.

According to the research from international real estate firm Knight Frank Vienna’s property market boasts firm fundamentals. For example, between 2015 and 2017 more than 44,000 new households are forecast to be created but only 32,000 apartments are expected to be completed in the same period.

The metropolitan area of Vienna accounts for a third of Austria’s population and in the last decade the population of wealthy people living in the city has expanded faster than any of its neighbouring northern European cities, including that of London.

According to Kate Everret-Allen, Knight Frank partner for international research it should be no surprise that mainstream property prices across Austria are up 52% since 2008 and Vienna’s prices have edged even higher, up 72% in comparative terms.

She explained that while price inflation has slowed since the middle of 2014 as safe haven flows have normalised now the UK’s decision to leave the European Union may provoke a new wave of capital inflows particularly if Vienna continues to position itself as a viable investment alternative to the German cities of Berlin and Frankfurt.

She also pointed out that as capital growth in the prime areas has slowed, the pied-a-terre and development markets have come under greater scrutiny from investors. Gross residential yields of 3% to 4% are being achieved in up and coming areas surrounding the inner city districts.

‘Alongside Germany, at 56% Austria has one of the lowest residential ownership rates in Europe, this figure drops to 20% in Vienna. Add to this the 6.6 million tourists that visit Vienna each year, resulting in 14.3 million overnight stays, and the potential pool of demand for landlords is evident,’ added Everett-Allen.

The report says that both population growth and hence development activity is focused on the 21st and 22nd Districts of Floridsdorf and Donaustadt which sit on the right bank of the Danube.

The prime district, which commands prices between €6,000 and €16,000 per square meter but in exceptional cases can reach €30,000 per square meter extends out from the 1st District to a surrounding ring which comprises the 2nd to 9th Districts and a few outlying areas including the 13th, 18th and 19th District.

The report also suggests that Vienna consistently ranks highly for its quality of life in many global reports and can compete with London and New York when it comes to culture in the form of museums, theatres and opera but it adds a level of privacy, discretion and security that few other global cities afford.

Russian interest in property in the city has been reined in by the rouble in recent years but German, Swiss, British, Chinese and Middle Eastern buyers are filling the gap.

• Propertywire