Slovakia Investment Property

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Slovakia Investment Property Newsletter
February 2005 - Issue # 5
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Dear

Welcome to the second 2005 issue of our - now monthly -
newsletter. Grab a nice hot cup of tea or coffee, while
sitting comfortably in your warm room, and have a read on
what's happening in Slovakia and how this will impact on
your investments in 2005.

In this issue you will find:

1. The Good News Keep Coming
2. Fancy Being on the Telly?
3. Where Is the Slovak Finance Market Heading?
4. Last Apartments Available at Rock-Bottom Prices
5. Win a Bottle of 'Medovina'! (Prize Draw)
6. Tell Us What You Think!

===================== FEATURE EDITORIAL =================

1) The Good News Keep Coming

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Slovakia, once among the more backward countries of Central
Europe has, in recent years, transformed itself into a
regional leader in economic growth and a magnet for foreign
investment.

Accordingly, the country is being constantly praised by
international institutions as a model of reform and its fast
progress is being acknowledged by the main rating agencies.

As expected, following Fitch Ratings, Standard & Poor's also
upgraded Slovakia's rating to A- . Slovakia is now equally
rated as Hungary and the Czech Republic (and one notch above
Poland). However, while the three countries have a stable
outlook, Slovakia was given a positive one, in expectation
of a further upgrade.

Moody's followed suit and upgraded Slovakia's rating to A2
with a positive outlook, praising the country's structural
reforms and 'one of the strongest business environments in
Central and Eastern Europe'.

For more tax information, as well as regular economic and
financial updates on Slovakia, please visit
www.slovakiainvestmentproperty.com.

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2) Fancy Being on the Telly?

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You will recall our January email forwarded to you from
the BBC looking for Slovak property buyers to be featured
on their new Eastern Europe program series. (For those of
you who volunteered or are thinking of doing so - we look
forward to seeing you on the telly!)

And for those undecided, there is a second chance! ITV has
contacted us in search for a British couple looking to
purchase in Slovakia:

"I am a Researcher on ITV's 'Tonight with Trevor McDonald'
programme and we are doing a programme on Brits investing in
Buy To Let properties in Eastern Europe.

We are looking for a British Couple who have made contact
with estate agents, with regards to looking for potential
properties to buy in Slovakia. If anyone has been looking
for a property for a while and would like to make a trip to
Slovakia to view some properties for the first time, please
get in contact with me as I would love to talk to you about
it.

Please email me at Amanda.bainbridge@granadamedia.com or
call 0207 316 6438."

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3) Where Is the Slovak Finance Market Heading?

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Many of the enquiries we receive from you have to do with
the mortgage finance available in Slovakia. Therefore, in
this issue we decided to bring you an overview of the
current situation on the Slovak mortgage market and its
prospects for 2005.

Since summer 2004 foreigners have been able to obtain a
local mortgage for their Slovak property. In reality
however, you are likely to be one of the first (if not the
first) applicants approaching the lender. Slovakia not only
is a new mortgage market for foreign citizen, mortgages
have only been available to Slovaks for a few years.

Applying for a local mortgage will therefore require some
patience and understanding of what can be achieved in this
very new (yet fast developing) market. First, forget all
you know about UK mortgages. In Slovakia, the choices are
fairly easy and straightforward. It is simply because there
is only one mortgage product.

But back to that later. In fact, you do have a choice.
Very often, buyers of overseas properties opt to obtain
the necessary funds in the UK. This is typically done by
remortgaging an existing UK property and using the equity
to pay for the purchase abroad.

As always, there are pros and cons of such an approach.
Among the advantages are lower set up costs, lower interest
rate (at present) and ease of transaction. Disadvantages
such as exposure to exchange rate risks and tying up of
your UK home need also be carefully considered.

The right decision will depend entirely upon your own
circumstances. So, let's say you don't have a UK asset
with sufficient equity or don't wish to tie it up - what
can you expect from the Slovak finance market at present?

As we indicated, the choices are somewhat limited. Whether
you are a buy-to-let investor purchasing one (or ten) rental
apartments, or an owner-occupier looking to buy a home for
your own use, you will be using the very same mortgage
product.

Slovakia is a market where virtually all property sold goes
to local owner-occupiers (and with the shortage of housing
and increasing wealth we don't expect this to change over
the next years) and this is who the banks target with their
finance products. This means no buy-to-let or investor loans
are available.

Just as a Slovak applicant, you will need to prove sufficient
income to the lender. All banks offer their loans on a full
status basis (self-certification is not available). What the
lender wants to see is proof of your NET income - after tax
and after any UK loans and major or periodic expenses.

Rental income from the property you are purchasing will not
be taken into account - unless you have already been paying
tax on this (income) and it shows on your tax returns.

Those looking for the UK investor's favourite interest-only
mortgage will look in vain - all mortgages in Slovakia are
on a repayment basis (paying back both the capital and the
interest).

Until very recently the standard mortgage term in Slovakia
was 15 years. While 15-20 years is still the most common
mortgage, most banks are now offering longer, 25 to 30 year
terms. Conditions and rates will vary from bank to bank.

Important to note is that all mortgages must be repayed at
the age of 65. This effectively means that an applicant of
55 will only be able to take out a 10 year mortgage.

So, I hear you asking, what about the interest rates?
Currently you will need to count with 6-7% annual rate.
Most applicants will be in the 6 to 6.5% span, while the
lowest possible rate offered by a few banks to the top
score applicants is 5.5%. 7% is the top end for those
perceived as higher risk by the lenders.

Of course interest rates don't usually tell the whole story.
In Slovakia, you will pay an arrangement fee (charged by
all lenders) that goes from 0.3% to 1% depending on the
bank as well as your own financial situation. There are
several other charges (such as notary cost, translations,
valuation) you will incurr when taking out a mortgage, and
fees for early repayment (2-4%) you won't be able to avoid
if you pay off your mortgage before it matures.

What you also want to consider when deciding whether to
take out a Slovak mortgage or not is the fact there are
no remortgage facilities or equity release schemes. (Of
course this could change in the future.)

*** Important ***

When buying an existing property in Slovakia you need to
check whether it is sold free of any mortgages or debts.
Mortgages in Slovakia don't automatically need to be paid
off when a property is being transferred, and the new
owner can incurr the existing debt.

So what is the outlook for 2005 and beyond?

Mortgages will become even more accessible as banks are
starting to see the vast potential of the Slovak market.
Currently only a small percentage of Slovak buyers uses a
mortgage to pay for a property purchase. However, mortgages
are becoming increasingly popular, and this development will
continue as products become cheaper and easier to obtain.

The current starting trend of longer term mortgages is
likely to continue in the future, with all lenders offering
25/30 (and eventually longer) term loans at competitive
rates. Arrangement fees may be lowered cutting the cost
of mortgage set-up.

On the other hand, we don't expect any changes from the
repayment to interest-only products as the market is driven
by local owner occupiers and doesn't offer sufficient
potential for lenders to introduce investor-type products.
Similarly, mortgages are likely to remain full-status,
particularly considered that only large investor markets
- the UK and Spain - offer self-certification products in
Europe.

We believe that rates will still go down slightly in 2005.
The base rate in Slovakia went from over 6% to 4% in the
last two years, and mortgage rates went down dramatically.
The latest cut - this year - brought the base rate down to
3%. Mortgage rates should be readjusted to this last cut
shortly.

Slovakia will adopt the euro in 2008/9 which means the
National Bank of Slovakia's (NBS) base rate will need to
be aligned with the ECB base rate (at present 2%). However,
ECB is likely to slightly lift its base rate in the meantime,
which would make the ECB and NBS rate difference very small
or null.

As a result we expect the mortgages to become up to 1%
cheaper in Slovakia in 2005, with little changes in 2006/7.
Please note that the above should not be taken as advice or
information to be acted upon, and is purely an attempt to look
at what might happen in the market based on current situation.

For details on NBS base rate history please visit:

http://www.nbs.sk/SDDS/UROK/DISKONTA.HTM

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4) Last Apartments Available at Rock-Bottom Prices!

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If you have been receiving our emails over the last few weeks
you will know about our unique opportunity to invest in THE
hot spot in Slovakia today.

TRNAVA - where a third of Slovakia's annual (from 2006/7)
production of 1 million cars will be manufactured and massive
foreign investments are to create 10,000 new jobs in 2005/6
(and 25,000 within five years) - is a historic town a mere
20 minutes from the capital Bratislava.

And with massive demand for quality property from both local
families (resale market) and the tenants starting to move into
Trnava in 2005, 2006 and beyond, our apartments in the only
new development in town - close to the town centre, Peugeot
Citroen plant as well as a new shopping mall to be constructed
shortly - offer fantastic capital growth and rental potential.

With prices from 29,000 GBP for good quality one bedroom flats
we believe this to be the perhaps best opportunity in Eastern
Europe at present.

Only last few units are now available, therefore, should you
be interested, don't delay and contact us today.

-----------------
As a registered member of Slovakia Investment Property you
will always receive first notification of developments and
first opportunity to choose and reserve your preferred unit.

If this email was forwarded to you by a friend and you are
not a registered member, please remember that you need to
register in order to be able to receive notifications and
view our deals.

To join FREE of charge, please follow the link below:
http://www.slovakiainvestmentproperty.com/register.php

PLEASE REMEMBER:
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Slovakia Investment Property is not your typical UK
company of UK nationals claiming to be foreign property
experts. Not only have we teamed up with the best local
experts in Slovakia, we are Slovak nationals with first
hand experience of the Bratislava market. And yes, we
also put our own money into the opportunities offered.

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5) WIN a Bottle of 'Medovina'! (Prize Draw)

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Last month we introduced our new competition giving one of
you a chance to win some of Slovakia's best wines and liquors.
The lucky January winner is Mr. N. Kelso. Congratulations!

And now we are looking for another happy winner to enjoy a
bottle of medovina - Slovakia's famous liquor made of honey
("med") and herbs that has been appreciated for many centuries.

All you have to do to be entered into the prize draw is email
your answer to our Question of the Month before 10 March to:
competition@slovakiainvestmentproperty.com.

It's as easy as that! We will contact the winner to obtain
the postal address. Good luck!

Question: "What improvements (if any) would you like to see
on our website or in our service?"

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6) Tell Us What You Think!

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We would love to hear what you think of this issue of our
newsletter. We hope you find the information useful and
wish you best success in your investment activities.
And of course, if you have any suggestions for upcoming
issues that you'd like to share with us, please send them!

Just e-mail us at: contact@slovakiainvestmentproperty.com

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We are looking forward to seeing you next month. In the
meantime, if you have any questions or would like to
request further information, please contact us at
info@slovakiainvestmentproperty.com or at
+44 (0)207 152 4014.

Best of success,

Petra Gajdosikova
Managing Director
Slovakia Investment Property
www.slovakiainvestmentproperty.com

Slovakia Investment Property is a trading name of
Alpha Real Estate Investments Limited