Slovakia Investment Property

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Slovakia Investment Property Newsletter
February 2007 - Issue # 28
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Welcome to the February edition of our Slovakia newsletter.
If you are interested in the Bratislava market, you have
certainly come across the much (mis)used term "Vienna Factor".
We look at the real Vienna effect, beyond the cheap marketing
gimmick frequently used by property agents.

Our focus will remain on Bratislava next month, with a detailed
overview of the most significant real estate projects planned
to further transform the city in the next 3-4 years. A special
attention will be given to brownfield developments, until
present virtually unknown in the Bratislava market.

And, in case you've missed any of our previous newsletter
issues, they are available for you here:

www.slovakiainvestmentproperty.com/newsletters.php

In this issue you will find:

1. Highest Growth in Europe
2. The "Vienna Factor" - Myth and Reality
3. Top Property Investment Destinations for 2007!
4. Tell Us What You Think!

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

1) Highest Growth in Europe

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After a staggering 9.8% GDP growth in QIII 2006, Slovakia’s
economy again exceeded all analysts' expectations. Achieving
real GDP growth of 9.5% in the fourth quarter (2006), according
to Slovak Statistical Office.

The National Bank of Slovakia (the country's central bank)
has lowered its inflation projections for 2007 from previously
estimated 2.8% down to 1.6%.

* * *

Compared to other EU citizens, Slovaks see the impact of
EU membership on the local economy and employment far more
positively. Latest results of the Euro barometer poll show
that 70% of Slovaks consider the impact good or fairly good,
which is more than 14% above the EU average.

* * *

According to National Bank of Slovakia, active tourism income
in the first 10 months of 2006 was SKK 36.835 billion (1.08
billion euro) - an increase of almost 19% y/o/y.

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2) The "Vienna Factor" - Myth and Reality

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Centrope
--------

Centrope, a core region in Central Europe along the Vienna-
Bratislava corridor, is considered one of the areas with
highest economic potential in Europe. With excellent business
environment, good transport and telecoms infrastructure,
highly skilled labour force, many research and science
institutions as well as 22 universities and many other
competitive advantages the region has become focus of
international investors.

The heart of Centrope - the area from Vienna through Bratislava
to Trnava - is positioning itself in particular as a centre
of automotive industries, biotech and pharma sectors, IT,
and increasingly also tourism.

Detailed information and news can be seen on Centrope page:
http://centrope.info/baernew/topics/Region_TheRegion

The real "Vienna Factor"
------------------------

"Twin City" denominates a unique alliance of Vienna and
Bratislava, two capitals of 'old' and 'new' Europe. The
concept of close economic and cultural cooperation aims to
bring new industries and business to the region and increase
earnings potential for both cities.

The two geographically closest capitals in Europe will become
even closer by completion of a few missing kilometres of
the highway (Austrian side). When completed in late 2007 it
will cut the commute time from just under an hour down to a
little over 30 minutes.

Some UK based property agents have been marketing Bratislava
projects based on the so-called "Vienna Factor". But is
there really such a thing?

Well, yes and no.

The economic, trade and business links and cooperation are
significant and will keep having a positive impact on the
Slovak capital in the future. (The highway completion will
also be positive mainly for trade and transport industry.)
That is the True Vienna effect.

What property agents may try to make you believe - that large
numbers of Austrians will be moving to Bratislava and pushing
property prices up - is little more than a marketing gimmick.

It's not to be expected that Austrians and Vienna inhabitants
will be setting up homes in Bratislava (bar the few business
people who have already done so, on paper, for tax purposes).
For one, the cultural and language differences are not to
be overlooked and few foreigners are willing to learn Slovak
(which is necessary when living in the country longer term).

Second, there really isn't much of a reason for Viennese to
move over. While property prices are significantly lower in
the Slovak capital, this is only true when comparing equal
with equal. Foreigners working in Bratislava are almost always
living in the city centre, the desirable and convenient first
district.

While the central districts of Vienna are several times more
expensive, reasonably priced properties can be found on the
outskirts of the Austrian capital. Or, if housing cost was
such an issue, Viennese could move to any of the villages
and small towns closer to the Slovak border, where properties
are below Bratislava prices. (Which is why many houses and
plots in the Austrian villages have been bought by Slovaks
in recent years.)

Apart from housing, cost of living is not hugely different
in the Slovak and Austrian capitals. Food, utilities, petrol
are all very similarly priced, while services are still more
costly in Austria. The gap, however, is not nearly large
enough to justify moving to another country, no matter how
geographically close.

And, while Vienna's per capita GDP is higher than that of
Bratislava, the opposite is true when comparing the Slovak
capital to other towns in eastern Austria.

So while Austrians suddenly moving to Bratislava are more
of a marketing myth, the good news is, Bratislava doesn't
need them or other foreign property buyers. The market is
strong and has been developing very positively, based almost
purely on high domestic demand from Slovak home buyers. And
that demand is not going to diminish anytime soon.

Transport hub
-------------

Bratislava, although still largely undiscovered, has been
increasingly getting onto the European transport hub map.

The Slovak capital now has a unique chance to be part of
an ambitious EU project of modern pan-european railway
networks. Instead of Budapest as originally planned, EU has
decided to include Bratislava into the new Paris-Strassbourg-
Stuttgart-Vienna-(Bratislava) railway corridor.

The benefits for Bratislava would be unprecedented (in
particular because the several hundreds of millions euro
project is to be funded by the EU). The city would gain
modern, direct rail links to major European capitals as
well as the much needed rail connection between Vienna
and Bratislava airports, several new city rail lines and
new modern terminals (and hence a solution to the worsening
congestion problem in Bratislava).

Bratislava officials have yet to approve the project. It
would not be the first time Slovakia has lost 'free'
EU funds for lack of cooperation and local power plays.
Let's hope for a positive outcome this time.

While the lack of a direct transport link between Bratislava
and Vienna airports is proving increasingly inconvenient,
those traveling between the two cities' town centres have,
since last June, gained an additional transport option. The
Twin City Liner, a high-speed catamaran service, has proven
popular with visitors and commuters alike.

Meanwhile, Bratislava's M.R.Stefanik Airport (after cancelled
privatization to remain in state hands) has continued to see a
staggering growth, with passenger numbers nearly doubling each
of the last 3 years. In the first 8 months of 2006 1.55 million
passengers have used the airport - an increase of 47% y/o/y.
The annual figure is expected to be over 2 million, five
times more than predicted 5 years ago.

The new terminal (100 million euro investment) is planned to
be completed in spring 2011. The airport is by then forecast
to be used by 4.5-5 million passengers a year. Future plans
count with yet a new terminal for 10 million passengers as
Bratislava is to become an important regional transport hub.

Largely thanks to the new air links visitor numbers in
Bratislava have kept increasing in double digits (far above
most European cities). It is in particular foreign visitors
who have been contributing to the city's increasing popularity.
Numbers of British, Italian and French tourists have seen
the highest increases in 2006.

Changing face
-------------

With Bratislava's fast growing wealth and increasing importance
in the Central European region, it is of little surprise to
see very tangible changes in the city itself.

To accomodate its population's needs, the city has started
growing beyond its boundaries. Whether it be by the growing
number of satellite villages springing up around the capital,
or by the planned rezoning of almost a thousand hectares of
agricultural land on the periphery. After all, the capital
is growing in population - in particular due to thousands of
new migrants moving in each year from other regions of Slovakia.

And new settlements and residential areas are not being raised
only in the city's outer parts. Bratislava is anxiously awaiting
several high profile projects that are expected to further change
its face into a modern European city of regional importance.

We will take a detailed look at the largest and most significant
residential and commercial projects in our March issue, eg.:

* Twin City (including the main bus terminal redevelopment) -
at 500 million euro the largest development in Slovakia and
Central Europe

* Centre Plaza - redevelopment of the largest city centre
square including hotel, offices and new shopping mall

* River Park, Eurovea, Panorama City - on and near Danube
riverside

* Main rail terminal complex

In addition to these mega projects (some of which can be considered
brownfield developments) we will look at a few smaller brownfield
projects, due to the change of directions this concept provides.

Developers in Bratislava have so far stayed away from brownfield,
due to very high costs (many of the sites house old factories
and require decontamination; as well as replacing engineering
services). However, as suitable plots are vanishing - in
particular in more lucrative locations - developers are taking
the plunge: several pure or partial brownfield projects are
planned for the next 2-4 years.

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3) Top Property Investment Destinations for 2007!

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As you may have heard, according to the latest Knight Frank
report, Germany and Slovakia are two of the best destinations
for property investment in 2007, based on strong capital
growth expectancy.

Although I would argue one should always invest in property
for the long (or at least medium) term, we at Alpha Real Estate
Investments (Slovakia Investment Property) have long believed
in the massive potential of both the German and Slovak markets.

If you haven't had a look at our German site and deals,
please visit our main home page at www.alphare.net.

Our latest Berlin deal has sold out fast, and we've got
more exciting German investment opportunities for you.
From single apartments in top areas starting at just 30k
GBP to residential and mixed use blocks from less than 500k
to several millions.

Germany and in particular Berlin offer some of the lowest
prices in Europe (lower even than most Central Eastern
European cities) and extraordinary affordability. After
a 13 year decline in property values prices in many areas
are up to 60% lower than in early 90's. OECD has named
Germany the world's most undervalued property market.

Coupled with a very strong rental market and high yields,
as well as the strong recovery of German economy, we -
along with large global investors and consultancies -
believe Germany now presents one of the world's best markets
for property investors. To learn more visit www.alphare.net.

* * *

And, in Slovakia...

For all of you who confirmed interest in our long-awaited
new development in a unique location on the edge of Bratislava
city centre, you will be pleased to know the project is in
the final contract stages and should be ready to go ahead
in late March. After working on it since March 2006 we
certainly hope there won't be any more delays.

* * *

And, don't forget... a large number of resale and period
properties are available in Bratislava and other regions
of Slovakia. For larger investors, we have commercial
properties from 1 - 100 million GBP, as well as several
deals and joint-ventures for foreign developers.

Whatever your requirements, email us at:
info@slovakiainvestmentproperty.com

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4) 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
www.alphare.net

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