Slovakia Investment Property Newsletter
March 2007 - Issue # 29

In this issue you will find:

1. Rates Down, Koruna Up
2. A Wave of Mega-Projects for Bratislava
3. Opportunity of the Year!
4. Tell Us What You Think!
   

1) Rates Down, Koruna Up
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In 2006 the Slovak economy grew by 8.3% according to the Slovak Statistics Office.
Forecasts for QI 2007 growth are 9.6%.

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The appreciation of the Slovak koruna (SKK) keeps accelerating, with new all time highs for the Slovak currency. On 20 March the country’s central bank, National Bank of Slovakia (NBS), undertook a direct intervention once again when the exchange rate reached 32.80 SKK/euro. 

Within a year the koruna has posted a nearly 10% appreciation to euro as well as to the UK pound. That’s great for those who have purchased property in Slovakia in the past as it puts up the euro or GBP value of their asset. On the other hand it makes property slightly more expensive for those entering the market now.   

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Now a good news for all those looking to invest in Slovakia utilizing a local mortgage. After seven base rate hikes since early 2006 NBS has, at the end of March, lowered the rate by 25bp down to 4.5%. The move came in line with market expectations and further cuts are awaited before Slovakia’s euro adoption (planned for January 2009).   
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And for somewhat more embarrassing news… the long agony of Slovakia’s national carrier Slovak Airlines has ended. The company was declared bankrupt this month, after many years of struggle and mounting debt. Slovak Airlines have not played a significant role for the last decade, with the dominance of low costs carriers such as Slovakia based Sky Europe, Ireland’s Ryan Air, and others.
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The level of rent that can be charged for a restituted property will continue to be regulated until the end of 2008. Originally the regulations were to be lifted this year. As this only applies to real estate handed back in the past restitution process, it only affects a small number of properties and is generally of no relevance to property investors.

2) A Wave of Mega-Projects for Bratislava
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Bratislava is a city in transformation. On one hand there’s its fast growing wealth and increasing importance in the Central European region, on the other the need to accommodate its expanding population's needs. After all thousands of Slovaks move from other regions to the capital every year. It’s little surprise then to see unprecedented changes in the city’s development, including some truly remarkable real estate projects set to leave a mark on the capital in the next 2-4 years.

Bratislava, a relatively compact city, has started growing out of its boundaries in recent years. An ever increasing number of satellite villages have been springing up around
the capital, in all directions. More on that next month.

A rarity for a European capital is the planned rezoning of almost a thousand hectares of agricultural land in parts of BA IV district. A whole new suburb (Southern City) will also be created in the south of Petrzalka (BA V), with plans for several thousands of apartments as well as commercial facilities to be built over the coming 10 years.

However, new developments are not just concentrated on the outskirts of the Slovak capital. A number of high profile projects in lucrative near centre locations are expected to transform Bratislava’s face into a modern European city of regional importance.

Among the most eagerly awaited are the riverside developments Eurovea and River Park along the northern shore of the Danube.  

* River Park *

An ambitious project to transform Bratislava’s riverfront, River Park (on the border of districts BA I/IV) will comprise offices, a 5-star Kempinski hotel, shopping zones as well as a few hundred top end apartments. Completion of the project by Slovak developer J&T is expected by 2010.

* Eurovea *

Irish investor Ballymore Properties has started developing part of the Danube bank known as Zone Pribinova (border of BA I/II). This vast wasteland area will be transformed into office blocks, a 4-star Sheraton hotel, 250 high end luxury apartments and retail facilities.
The in total 230,000 m2 will be developed in phases to be completed by 2009-2011.

The for the foreseeable future largest development to be seen in Bratislava, however, is Twin City:  

* Twin-City (Main Bus Terminal Redevelopment) *

The main bus terminal on the border between the Old Town district (BA I) and BA II will receive a massive 500 million euro facelift. Twin City, the largest real estate project in Slovakia and Central Europe, will, when completed in 2011, dramatically change the face of the Karadzicova-Mlynske Nivy zone a short walk from the city centre.

The country’s largest developer HB Reavis will deliver a new modern bus terminal (45,000 m2), as well as a vast multifunctional complex with a 200 room 4-star hotel, a 42-story office tower (tallest in Slovakia), 100,000 m2 of retail and entertainment space, plus luxury, high-end apartments.

The complex will spread from the terminal across Mlynske Nivy street to replace the existing site of the former cable factory Kablo, whose buildings will be demolished.

A smaller, but similarly important project also involves a full reconstruction of an existing facility – this time the train station:

* Main Rail Station Redevelopment *

Developer I.P.R. Slovakia should, by 2009, deliver an entirely redeveloped main rail terminal. Part of this 200 million euro investment will be a hotel, shopping centre, as well as two office blocks.

Both of the station (re)developments can of course be considered partial brownfield projects. Another significant brownfield development is Centre Plaza in Bratislava’s first district:

* Centre Plaza *

British developer Lordship is planning a 180 million euro redevelopment of the popular Kamenne namestie (square) in the city centre, including replacing the current Tesco department store with a modern shopping complex (with a new Tesco outlet), entertainment space and offices. While in its initial plans the project counted on replacing the 1960’s Kyjev Hotel with a new hotel tower, due to planning restrictions a reconstruction of the hotel seems a more viable option.

The concept of brownfield development is relatively new in Slovakia, and few projects
have been raised so far. Developers in Bratislava have stayed away from brownfield,
due to high costs (many of the sites house old factories and require decontamination; as well as new engineering services). The most important concluded project is Tower 115, a newly redeveloped office block near the new riverside zone. 

However, Bratislava offers a number of suitable sites, thanks to its earlier era planning that has often put production factories in very close proximity of the city centre. As suitable plots are vanishing - in particular in more lucrative locations - several of these now abandoned buildings are awaiting redevelopment in coming years, as pure or partial brownfield projects. Such development also offers another important advantage –  generally a clear ownership structure, meaning developers can avoid the (often years long) process of securing all parts of the land from its typically many owners.
 
And of course Bratislava will also see several large greenfield projects completed before the end of the decade. Among the most prestigious are… 

* City Business Center I-V *

Slovakia's largest commercial developer, HB Reavis, is currently building the massive new CBC complex (5 buildings of 8-25 stories and over 106,000 m2) along Karadzicova street. Redevelopment of this boulevard forming a division between BA I (city centre) and BA II districts will give this lucrative area at the entry to the Old Town a respectable, modern and cosmopolitan look.

* Panorama City *

In zone Pribinova, in close proximity of Eurovea, developer J&T will erect two 145 m tall towers. The Panorama City development will consist of exclusive apartments, offices as well as a 4-star hotel. (Completion 2009)

Currently under construction are several administrative complexes, including Park One and Astoria Palace in the city centre, Apollo II (BA II), Aupark Tower and Digital Park (BA V). The Lakeside Park office blocks are planned for future construction in BA III district.

While Park One (modern 9-story office block near the Crowne Plaza hotel and the Presidential Palace) and Astoria Palace (office building on Hodzovo nam.) are more significant thanks to their location in the heart of the city centre, another business centre project impresses by its sheer size:

* Apollo Business Center II *

Following its successful Apollo BC, HB Reavis will, in 2008, deliver Apollo BC II, with 8 buildings (8-17 stories, total site area 140,000 m2) and 75,000 m2 of rentable office space. 

As we see, the Slovak capital can look forward to several exciting new projects. And they are much needed, in particular in the residential segment.  

Currently there are 310 occupied properties for each 1,000 inhabitants. (Approximately 10% of all homes in Slovakia are unoccupied either due to either bad technical standard or unsolved legal or inheritance proceedings.) The EU average stands at over 400 for 1,000 inhabitants… which is the future target of the Slovak government.

That would require a minimum of 25,000 new properties completed each year; however, the number of new homes is far lower at just 14-15,000 annually. While this represents an increase from recent years’ 12-13,000, it is far from sufficient, and much below the construction rates in other European countries. The question remains on whether the newest Bratislava developments, almost exclusively aimed at the top-end of the market, will do anything to meet the vast demand for new homes, which is, in its majority, aimed at the medium price segment at best.

3) Opportunity of the Year!
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If you're looking to invest in Bratislava, we've got a truly exceptional opportunity for you. In fact we're confident to say it's the best opportunity in Bratislava and there won't be similar anytime soon!

A small development of just 22 units (18 one and two bedroom apartments and 4 studios for commercial or residential use), the project is unique due to its central location.

Located on the border of BA II and BA I districts, it offers an easy 5 minutes walk to the heart of the city. And given that the city centre is the area with the best rental
demand as well as highest capital growth in Bratislava, it's not difficult to see why its location makes this project a winner!

What's more, the building is fantastically positioned in Bratislava's most exciting redevelopment zone. Just a block away from the massive City Business Centre (under construction on Karadzicova street, BA I) and simialrly close to the 500 million euro
Twin City development site (around the main bus terminal). For details on these projects and their impact on the face of the Slovak capital, see point 2) above.

With apartments starting at just 57k GBP including VAT this rare development, offering modern standard as well as a central location, will sell out very fast. 

Reservations are opening in a few days, so if you are interested in learning more, email us for a full information pack. Details of the deal will be sent out on Monday-Tuesday.

This is the one opportunity you really don't want to miss.

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In case you haven't had a look at our German site and deals, please visit our main home page at www.alphare.net. We've got several exciting German investment opportunities for you, including a new Berlin deal with apartments in a top area starting at just over 30k GBP. Residential and mixed use blocks are also available (from under 500k to several millions), as well as commercial properties up to 100 million GBP.

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.

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Whatever your requirements we will be pleased to help. Just email us at: info@slovakiainvestmentproperty.com or at info@alphare.net (for Germany)

4) Tell Us What You Think!
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www.alphare.net