Slovakia Investment Property

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Slovakia Investment Property Newsletter
November 2005 - Issue # 14
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It's late November...temperatures in Central Europe are
down to zero, and early snowfalls announce the arrival
of winter. Yet Slovakia's property market continues at
full speed, with ever increasing interest from foreign
investors as well as holiday home buyers.

Therefore, in our November issue, we look at the current
condition of the property market and price levels in
Bratislava, according to area and property type. You
will also find an overview of 2005 price fluctuations,
area by area. Next month we will bring you a report on
the rental market, along with strategies for property
investment in Slovakia.

Enjoy reading...

In this issue you will find:

1. One Step Closer to Euro
2. Slovak Property Market - Overview
3. 2005 - Price Development - Area by Area (Bratislava)
4. Win a Bottle of 'Tokaj'! (Prize Draw)
5. Tell Us What You Think!

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

1) One Step Closer to Euro

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Slovakia is one step closer to adopting the euro. On 25th
November the country surprised by joining EU's Exchange Rate
Mechanism II (ERM II) ahead of the expected June 2006 date.

The central parity was set at 38.4550 koruna for 1 euro.
Slovakia must remain in the ERM II for 2 years, before being
allowed to adopt the euro. (In ERM II a 15% fluctuation
around the central parity is allowed.)

Slovakia is expected to meet all Maastricht criteria
(for single currency adoption) by January 2008.

* * *

Only a few European cities are of such importance to the
trans-european transport, and can, at the same time, gain
so much from it, as Bratislava within the Central European
Transport Corridor project.

Bratislava is at crossroads of road, water, and rail
transport of paneuropean significance: road links from
north to south of the continent, water ways from south-
eastern to western Europe, as well as railroads connecting
the continent's north-west and north-east with the east
(Ukraine and Russia that keep gaining importance for
international investors).

The Central European Transport Corridor aims to connect
Europe's north with the south, and Bratislava could become
the most important crossing of all three transport ways
within the corridor.

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2) Slovak Property Market - Overview

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Slovakia is increasingly getting onto the British property
investor's radar. Good yields, solid capital growth and low
prices are particularly appealing to those looking for better
returns overseas.

But, even in the best market, property is not a guaranteed
money-maker, and it is important to know what and where to
buy. So, let's have a look at the Do's and Dont's in Slovakia.

Most residential properties in Slovak cities consist of
communist built blocks (usually made of concrete panels -
hence their name, "panelaky"). Although these apartments
may seem cheap, they are less and less popular among Slovaks;
they rarely match today's living standards. Most panelaks
have not been properly maintained over the last 50 years,
and as their life span will near its end in the next decades,
many Slovak owners are not willing to invest the money needed
for the (often urgent) repairs.

For all the above reasons, prices of communist built flats
are unlikely to increase anymore. In fact, they have, in some
areas (except the city centres), dropped by 5-15% since 2004.
It is not recommended to purchase this type of property for
investment purposes. (The same applies to most Central and
Eastern European markets.)

Prices of flats in communist blocks in Bratislava start at
below £20,000 for a tiny studio in a panelak in Petrzalka
(BA V) or in the outer areas of Bratislava II, III, and IV
(districts). Average price of (communist built) flats in the
2nd district (BA II) is £600/m2, in the 3rd district (BA III)
approx. £570/m2, in BA IV £550/m2 and £500/m2 in BA V.

Apartments in brick blocks are higher priced than the more
common panel blocks. City centre (1st district, BA I) has
a far lower supply of communist properties with prices
averaging £900/m2.

A type of property of interest to an investor are apartments
in classic buildings found in the city centre of Bratislava
(as well as other larger Slovak cities). These, mostly pre-
war blocks, contain flats that are - because of their very
central location - popular for letting as well as resale.

However, if you want to achieve a good return, you need a
property in a good or reasonable quality building. If you
have ever been to Bratislava on a property viewing trip,
you will have noticed the drab communal areas of many of
these blocks. Similarly to the panelaks, many classic
buildings have not been properly maintained or renovated
over the past decades, and buying such flat will have a
negative effect on the letting and future growth potential.

Apartments in Bratislava I (city centre, Stare mesto/Old Town)
range from £800/m2 in the worst quality blocks up to over
£2,200/m2 for the top standard. Average prices of good quality
flats in decent buildings are around £90,000-£130,000 for a
2 bedroom. Top prices for very large apartments in well
renovated or new(ish) buildings currently reach £350,000.

Another type of property, hugely popular among Slovak buyers,
are new built apartments. Most of the new construction
activity takes place in Bratislava, while supply of new
apartments in Central and Eastern Slovakia is extremely low.

The main reason is the purchasing power of the population
and overall economic situation in the Slovak regions.
Apart from Bratislava, the only markets seeing increased
activity are the cities of Trnava, Zilina, and to some
extent Kosice.

Prices of new and newly built properties (INCLUDING VAT) in
Bratislava I (centre) range from £1,400-2,200/m2, in
Bratislava II £650-1,400/m2, while new properties in the
3rd district can be had at £600-1,550 and in the 4th district
between £580-1,050/m2. In Petrzalka (BA V) new apartments
are sold at £580-800/m2. (All prices include VAT.)

The variation of m2 prices within a district are due to the
location of the property. As an example, in Bratislava II
the areas of Vrakuna, Podunajske Biskupice, Dolne Hony and
Trnavka are less sought-after and accordingly prices are
at the lowest levels found in BA II, while property in
Ruzinov - a popular and established part of the 2nd district
- is higher priced, with yet higher prices achieved in the
area of Nivy, bordering on the city centre.

While most investors will focus on apartments, for their
higher rental yields and popularity (especially in central
locations), family houses are a type of property in demand
by a certain segment of buyers. In Bratislava houses are
mostly available on the outskirts of the city, as well as
in nearby satellite villages.

Houses range from large luxury villas in parts of BA I
(Slavin, Horsky park) with prices now reaching £2 million,
through new built (mostly catalogue style) homes within
5-20 km from Bratislava at £80,000-350,000, to small old
properties, often requiring renovation, in the outer areas
of Bratislava II, III and IV to be had from £80,000.

Due to their location away from the centre, houses offer
very limited rental potential. On the other hand, houses
and villas situated in BA I are in very high demand from
tenants, yet usually offer lower rental yields (compared
to apartments) based on their high purchase prices.

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3) 2005 - Price Development - Area by Area (Bratislava)

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There is no unified source of property prices in Slovakia,
and m2 prices vary hugely between the various types of
property. Therefore, it is not possible to precisely assess
capital value fluctuations in the various areas.

For an indication of 2005 price development in Bratislava,
we have compared average square metre (m2) prices in
November 2004 and october 2005 (Trh Nehnutelnosti, a
bi-monthly real estate publication, was used as source).

Note that no distinction was made of the different property
types - hence the (average) figures include high appreciation
new properties as well as depreciating panel block apartments.

area (district) (price change, %)
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Stare Mesto (BA I) + 12%

Nivy (BA II) + 9%
Ruzinov (BA II) + 12%
Trnavka (BA II) + 4%
Vrakuna (BA II) + 7%
Dolne Hony (BA II) + 1%
Pod. Biskupice(BA II) + 11%

Kramare (BA III) + 7%
Nove Mesto (BA III) + 3%
Raca (BA III) + 1%
Vajnory (BA III) - 22%

Karlova Ves (BA IV) - 12%
Dubravka (BA IV) + 5%
Dlhe Diely (BA IV) + 5%
Lamac (BA IV) + 7%
Dev. Nova Ves (BA IV)

Petrzalka (BA V) + 5%

Highest appreciation dependent on property type was
realized in Stare Mesto, Nivy, and Ruzinov, reaching
a maximum of 27%.

In general, the highest average price growth is realized
in the highly popular city centre locations, as well as
in areas with larger numbers of new built properties such
as Ruzinov (where higher prices of new built units push
the area's average m2 price up).

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4) WIN a Bottle of 'Tokaj'! (Prize Draw)

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As every month, it is again time to give one of you the
chance to win a bottle of Slovakia's famous Tokay wine.

The lucky October winner is Mr. L. Barnes. Congratulations!

All you have to do to be entered into the prize draw is email
your answer to our Question of the Month before 15 December to:
competition@slovakiainvestmentproperty.com.

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

Question of the Month:

Have you or would you consider purchasing a holiday home
in Slovakia?

If YES, where and what would you like to buy (ie city flat,
mountain/ski lodge, spa town property, etc)?
If NO, what are the reasons (ie, not looking for a holiday
home, not interested in vacations in Slovakia, don't have
enough knowledge about the country, etc).

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5) 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