Slovakia Investment Property

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Slovakia Investment Property Newsletter
April 2007 - Issue # 30
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Welcome to the April issue of your Slovakia Newsletter.
In line with a recently released study on property acquisition
and sales costs accross Europe, this month we're going to
look at the costs and expenses generally borne by an investor
at the various transaction stages in Slovakia. Purchase
costs, running costs, letting expenses, sales costs -
you'll find them all in the following overview. Read on...

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. Must Read: Excellent News for Investors
2. Maintaining Economic Leadership in CEE
3. Slovak Property - Transaction & Running Costs
4. New High Growth Opportunity in Bratislava
5. Tell Us What You Think!

===================== MUST READ NEWS ====================

1) Must Read: Excellent News for Investors

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As those who have bought and sold a property in Slovakia
will know, the Slovak tax system distinguishes between
three scenarios when it comes to taxing proceeds from
property sale. Income tax (19%) is payable on capital gains
except in the following cases:

a) the property has been used as principal primary residence
for at least 2 years prior to sale
b) the property has been owned for at least 5 years (not
used as PPR)

The main obstacle for a property investor has however been
a condition to point b) above, based on which the exemption
after 5 years of ownership does not apply if the property
has been used to generate income - including from letting.
This has meant investors (who have been letting their property)
were always liable for tax on profits from capital gains
upon sale. The exemption could only be applied 5 years after
the income generating activity had ceased.

Now for the news all investors will certainly appreciate:
Effective 2007 the restriction on rental property has been
abolished. What it means is after 5 years of ownership all
sellers are exempt from tax on capital gains!

NOte: the above applies to properties held in individual
name; companies are always liable to pay (19%) corporation
tax on profits from capital gains.

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2) Maintaining Economic Leadership in CEE

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Maintaining its continuously top position from the last few
years Slovakia is likely to remain the leader in economic
growth in Central Europe in the future. In its global economic
outlook report The International Monetary Fund (IMF) predicts
Slovakia to achieve an 8.2% GDP growth in 2007 and 7.5% growth
in 2008. (Slovak economy grew by 8.3% in 2006.)

* * *

A new report (By Global Property Guide) compares transaction
costs on property acquisition/sale in 37 European countries.
Investors in many markets face additional costs of up to 25%
of the purchase price on buying and selling. At the top of
the scale are Bulgaria and Russia (approx. 25%) while Estonia
and Slovakia are at the bottom (under 4%). Costs were calculated
on an apartment with a purchase price of 250k euro, paid cash.

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3) Slovak Property - Transaction & Running Costs

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Indeed, investors and buyers in Slovakia are fortunate to
be facing some of the world's lowest transaction costs at
purchasing and selling real estate.

Buying
------

While much will depend on the individual situation, obligatory
costs are extremely low. This has not always been so - there
were times not long ago when buyers were liable for a transfer
tax (stamp duty) of 3% (previously levied progressively up
to 20%). However, since 2004 Slovakia is one of the few
countries that have fully abolished transfer tax on property
transactions, bringing the costs of purchase down dramatically.

Let's now have a look at the typical costs associated with
a property purchase in Slovakia.

The only expenses all buyers have to pay for are land registry
(Kataster) fees and notary fees for certification of signatures:

- land registry (approximately 40 GBP for regular entry or
160 GBP for accelerated entry; the latter being recommended)
- certification by notary (very low nominal fees)

When it comes to other expenses - in particular agent fees
and legal fees - the scenarios are varied.

A buyer may use an agent working on his behalf (as is often
the case with foreign buyers, and in particular investors,
using the help of a sourcing agency to find a suitable property)
in which case a fee is generally payable by the buyer (2-5%
typically, though it may be more if other services are offered,
such as mortgage arrangement, legal services, fit-out, etc).

In other cases (in particular local buyers looking for own
residence) buyers will search for their home directly from
estate agents' listings. This means the agents are working
on behalf of the seller and while the purchaser will not be
charged a fee, the agent fee paid by the seller is usually
calculated into the sales price.

A similar situation applies to legal fees. Slovak buyers and
sellers rarely use a solicitor in the transaction. As in most
of continental Europe, the notary oversees the contract signing
but is not involved in drawing contracts or ensuring they are
fair to either party. It is therefore advisable for foreign
buyers to instruct an independent solicitor to work on their
behalf. The fees for such legal service depend on each law
firm as well as complexity of the transaction. (For residential
property conveyancing an experienced law firm in Bratislava
will typically charge 800-2,000 euro.)

Buyers taking out a mortgage in Slovakia will incurr additional
expenses:

- an additional land registry entry (40 resp. 160 GBP)
- bank arrangement fees (paid to the lender; commonly 0.20-1% of
value of the loan)
- in case a broker is used also mortgage broker's fee - from
fixed fee of around 300 GBP up to 1% of value of the loan
- in some cases lenders still require a notary deed (speeds
up repossession proceedings if needed; costs depend on
transaction value but generally around 300 GBP)
Note: All notarial fees are set by law

Selling
-------

And what about selling a property?

Most sellers will use an estate agent to find a buyer
for their property. The agent's fee is borne by the seller
and varies depending on agent and sales price. It is commonly
between 3-6%. (Small notary fees for certification of signatures
will also be payable.)

Letting
-------

As most investors will typically hold a property for a number
of years before disposing of it, it's important to understand
what costs are borne by the owner/landlord in case of letting
a property.

While it depends on individual agreement between landlord
and tenant, typically tenants are liable for the following
expenses (apart from rent):

- utility payments (electricity, water, gas, phone, etc)

While landlords usually carry the costs of:

- service charges (administrator fees, utility payments
related to communal areas)
- insurance (approx. 100 GBP p.a. for a 100k GBP flat)
- property tax (very low, 20-30 GBP p.a. for an average flat
in Bratislava)
- any repair, renovation and maintenance costs
- property management and letting services (letting only
is charged at one month rent; full property management
is only provided by a few agencies and typically varies
between 15-18% of the monthly rent)

Naturally there are also taxes payable on income, however,
they are not considered transaction costs and hence not
part of this overview. (19% income tax is payable on any
net income including rental and capital gains.)

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4) New High Growth Opportunity in Central Bratislava

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Looking for investment opportunities in Slovakia? Want to
maximize your capital growth potential?

Then you'll love to hear about our just released new deal
in Bratislava!

Very centrally located on the border of BA II and BA I
(districts) the exclusive 22 unit development is a mere
5 minutes walk to the heart of the city.

Set to benefit from the city centre's strong rental demand
and high capital growth, the 22 apartments and business
units offer a fantastic advantage to an investor: a sought-
after central location as well as new modern standard.

But that's not all! The development is situated in the
city's most exciting redevelopment zone. Just a block away
from the new office buildings of the City Business Centre
(Karadzicova street, BA I) and similarily close to the 500
million euro Twin City development site (including main bus
terminal redevelopment, Slovakia's tallest office tower,
4-star hotel, vast shopping and entertainment complex, etc).

Once completed this lucrative area will lend a new modern
face to the entry of the prestigious Old Town district.
The effect it will have on the area's property prices is
obvious...

Units start at just 57k GBP including VAT; expected rental
yields are at excellent 6-7%.

For a full info pack or to secure your unit email us at:
info@slovakiainvestmentproperty.com.

* * *

If you haven't yet had a look at our German opportunities,
please visit our main home page at www.alphare.net.
A new release of 1 and 2 bed apartments in a sought-after
Berlin area is coming shortly! Apartments from just 45k
GBP and let at 5% yields. Also on offer are apartment blocks,
mixed-use buildings, commercial properties. Email us your
requirements at info@alphare.net and we'll be pleased to help.

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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