Buyers Guide - General Description of the Market

The real estate market in Slovakia has been growing dynamicaly and it reached average yearly growth in value of residential properties on the level of 15 % in several consecutive years. Similar results are expected yearly over the longterm period.

The majority of new developments are located in Bratislava and surrounding municipalities. Other regions of Slovakia recorded growth in numbers of apartments under construction only recently.

The demand for residential properties is overwhelmingly pushed by the domestic buyers, however, important role is played increasing numbers of large international companies relocating in Slovakia, who are bound to find accommodation for their employees.

There has been a considerable inflow of investment into Slovak tourist resorts over the last five years, in particular into the ski and spa resorts. The result of this increased investment is steeply rising quality of services and an increase in numbers of tourists. This development resulted into the rising demand for quality holiday homes in main resorts. This segment of the market is pushed by the domestic demand as well.

Real estate prices are currently significantly lower than in Western Europe, however, given the location of the country and its rapid economic growth prices are expected to approximate to Western European standards rather quickly.

Given Slovakia's membership in the EU, join to Eurozone and numerous legal and economic reforms the Slovak legal norms, access to financing and the level of risk regarding real estate investment is comparable to the the most of the Western European countries.

Investment in the real estate in Slovakia offers advantages of transparent market, high domestic demand and overall swift economic growth. Slovakia has the residential real estate market significant by the unique combination of its parameters: low prices, low risk, high transparency and predictability of the market.

Since the accession of Slovakia to the EU, prices of new developments in Bratislava have been rising on unprecedented rate. In 2004-2005 the prices of new developments doubled and even tripled in some areas of the capital city. The reasons for this situation on the market would be increasing incomes, easier accessibility of mortgages and general lack of accommodation. Foreign buyers did not push the prices in Bratislava as their interest in Slovak flats was marginal. Prices of older apartments (mostly located in concrete apartment buildings) were rising at the same time in the aftermath of phenomena listed above. Apartments in the immediate centre of Bratislava are a category of its own due to the restricted possibility of new development in the area and limited number of apartments available.

Such a development attracted attention of many residential developers. The majority of apartments were developed in the region of Bratislava. There has been a significant rise in the number of apartments under construction as compared to preceding years. Number of developments under construction significantly modified trends of development on the residential real estate market in Bratislava.

Last year there were almost 15 000 new flats finished, the optimal growth in the number of new apartments should be at least 25 000. Given the economic growth, demographic development of Slovakia, internal migration of labour force and general lack of housing; the demand for new apartments was higher than supply for several years. However, prices of mid-market apartments (category into which the most of the current developments fall) are expected to rise at slower pace than in preceding years. Developers will focus on higher quality of apartments to reach the desired profits.

Reputable real estate agents and developers are expecting overall growth of 10-13% p.a. on the residential real estate market in Slovakia over next couple of years, with new developments reaching a significant growth and concrete-built apartments facing a drop in value in most areas. Slovakia is in need of 250 000 new apartments and houses. The lack of accommodation will be the driving force of increasing value of properties. Only 312 out of 1000 citizens of Slovakia own a house or a flat, as compared to Czech Republic where the number is 424 out of 1000. According to the poll organized by agency GfK Slovakia in 2007, 23 % of respondents aged 18 - 65 have been planning to resolve their housing situation in the near future.

Regional market in Slovakia will copy the development in Bratislava. Rise on the residential real estate market will be concentrated in the areas with highest foreign direct investment where higher monthly incomes will make new housing affordable. In these areas the prices of older apartments are still very close to prices of new developments. This should change with the rise in numbers of newly built apartments in near future as it happened in Bratislava. This is already true about Trnava (40 km from Bratislava) into some extent and there exist more precedents documenting this thesis.

In the year 2007 real estate prices growth was about 24% (source NBS).  It reached its peak by the end of the year. The demand was enormous; investors used investment in real estate as a medium to prevent inflation losses expected after January 2009.

In the year 2008 slowdown has been observed and prices have stabilized. Many new sizeable development projects entered the market causing closure in the mid-term gap between demand and supply on the housing market. Besides, Slovakia is going to join Eurozone in 2009 and many investors have been waiting for the announcement of the conversion exchange rate. Constant growth in value of Slovak Crown since January 2008 has drawn investors into a wait-and-see position.

There is an expectation that the market will start moving again in the second half of 2008. The rise of prices of real estate is predicted to be steady, reaching app. 17 % p.a. on average. Price are expected to be influenced by domestic demographic situation, growth in personal incomes, comeback of young Slovaks from abroad and lower interest rates on mortgages; rather than joining the Eurozone itself.