A growing number of investors are targeting Vienna’s pied-a-terre market, where attractive yields are on offer in key up-and-coming districts, according to a new report.

The ‘Austria Inside View’ report from Knight Frank suggests that the fundamentals for the city look rather solid, with more than 44,000 new households forecast to be created between 2015 and 2017, but only 32,000 apartments expected to be completed in the same period; adding to the existing supply-demand imbalance in the Austrian capital.

In the past decade, the population of wealthy people living in the city has increased by 67% – faster than in any of Vienna’s neighbouring northern European cities, including that of London.

Greater demand for housing is placing upward pressure on home prices which have risen by an average of 72% in Vienna, compared with the national average of 52% during the same period.

Knight Frank believes that the recent Brexit vote in the UK could lead to higher capital inflows in the city, especially if Vienna continues to position itself as a viable investment alternative to Berlin, Munich and Frankfurt.

As capital growth in the prime areas has slowed, Knight Frank reports that the pied-a-terre and development markets have come under greater scrutiny from investors. Gross residential yields of 3-4% are now being achieved in up-and-coming areas surrounding the inner city districts.

What’s more, Austria has one of the lowest residential ownership rates in Europe, with four in five households in Vienna choosing to rent in the city. Add this to the 6.6 million tourists that visit Vienna each year, resulting in 14.3 million overnight stays and Knight Frank says that ‘the potential pool of demand for landlords is clear’.

Kate Everett-Allen, partner, Knight Frank International Residential Research, said: “Vienna consistently ranks highly for its quality of life and can compete with London and New York when it comes to museums, theatres and opera but where it excels is in terms of anonymity, few global cities allow wealthy residents to live with an unrivalled level of privacy and security.”

Another bonus for some international property investors is the fact that Vienna represents a cheaper alternative to Switzerland, and yet it offers no inheritance tax, has a plethora of good international schools and lacks the complex residency rules that exist in Switzerland.

Alex Koch de Gooreynd, partner and head of Knight Frank’s Austria network, commented: “This is a city where residents including wealthy individuals from China, the Middle East, South America and Europe, feel at ease walking around alone in the daytime or at night.

“They want either a pied-a-terre they can use regularly – a classic city centre apartment with high ceilings where they can step out and immerse themselves in the cultural life or café society – or a full-time family home, perhaps in the surrounding green belt, where their children can attend one of the many international schools.”