Slovakia Investment Property

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Slovakia Investment Property Newsletter
May 2007 - Issue # 31
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Welcome to the May edition of your Slovakia Newsletter.
While we won't be reporting much on the arrival of warm
sunny summer days as yet, there's some good news coming
from Slovakia certain to warm you up. Especially if you
have or are planning to invest your hard earned cash in
the country's property market.

After numerous hikes in 2006 the interest rates are now
on the way down, in line with Slovakia's planned euro
adoption (Jan 2009). That is a welcome news for investors,
home buyers, as well as the local property market in general.

In this month's issue we are also going to look at the
likely growth and performance of the Slovak property market
in coming years and its main driving factors.

And, in case you've missed any of our previous newsletter
issues, you can find them all here:

www.slovakiainvestmentproperty.com/newsletters.php

In this issue you will find:

1. Interest Rates on the Way Down
2. Slovak Property: Drivers for Growth
3. Fantastic Growth Potential - New Bratislava Deal
4. Tell Us What You Think!

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

1) Interest Rates on the Way Down

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At the end of April the National Bank of Slovakia (NBS) cut
the base rate by 25 bp to 4.25% p.a. Low interest rates are
excellent news for both investors and local home buyers and
should ensure the continued buoyancy of the Slovak property
market.

* * *

Slovakia’s GDP grew by 8.9% y/y in QI 2007. This year's GDP
growth is expected to come at a record high 8.7% p.a. (OECD),
easily maintaining the country's long term position as the
Central European economic leader.

The registered unemployment rate fell to 8.50% in April,
a new record low level, according to the Slovak labor office.
That represents a 0.39% drop compared to March and a strong
2.54% fall y/y.

* * *

Low-cost carrier Ryanair has announced a new route from
Bristol to Bratislava (starting on 8 November 2007). Ryanair
already flies from Bratislava to a number of European cities
including London, Dublin and East Midlands (airport).

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2) Slovak Property: Drivers for Growth

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We all know investors looking for overseas property - in
particular in emerging markets - have primarily one goal
in mind: capital gains.

So, how has Slovakia delivered so far and what potential
does the market offer for the foreseeable future?

For the start, there are many regional housing markets so
you need to look at them separately. The highest growth
as well as best potential in the short-medium term has
been seen in the economically well-off regions (such as
Bratislava) as well as areas that have received significant
foreign investments (eg. the car towns of Zilina and Trnava).

Bratislava as the main destination of foreign direct
investment and the wealthiest part of Slovakia has been
beating all other regions both in terms of the market's
buyoancy and growth.

Continuously high demand
------------------------

Demand for good quality housing is very strong and still
growing, as more and more buyers - mainly young people -
are able to purchase a new home. This is due to the good
economic situation in the capital, fast increasing incomes,
as well as more and more widespread use of mortgage finance.

At present the demand outstrips supply of quality housing
and any property put onto the market (in particular new
developments; and of course classic city centre flats that
have always been highly sought-after) sells fast. Naturally
as the market is developing and buyers have more options,
location and standard (as well as payment terms, etc) are
becoming more important and make some properties more
desirable than others.

Bratislava, with its nearly 500,000 inhabitants by far the
largest (and wealthiest) city, is also home to a large share
of the country's new residential and commercial construction.
(In 2005 completed dwellings were located as follows:
Bratislava region 31.5%, Trnava region 13.8%, Zilina region
13.4%, Presov region 11.8%, Trencin region 10.6%, Nitra
region 7.3%, Kosice region 6.4% and Banska Bystrica region
5.2% of the total units.)

The dominance of the capital is not surprising. With wages
and standard of living significantly above other areas of
Slovakia (in particular the centre and east), Bratislava's
population can afford to purchase properties at prices
out of reach of locals in most other regions. While the
desire to buy a new, better quality home is not foreign to
those living in Kosice, Presov, Banska Bystrica regions,
the purchasing power is low. Developers therefore mostly
don't see new construction viable in such areas, and new
residential projects can be counted on one hand.

Away from Bratislava the cities of Zilina and Trnava are
worth mentioning as having an increasingly thriving market
(though not allowing comparisons to the capital). The main
cause for the new demand is fast growing local economy,
employment and wages - in particular thanks to the huge
car industry investments in both towns.

Prices on the up
----------------

So what has been happening to property prices in the
last year or two?

Bratislava has seen a steady growth in recent years. An
average rate is nearly impossible to establish, not only
due to lack of official data but also large disparities
between different property types.

The properties (apart from land) experiencing highest
appreciation in Bratislava have been primarily city centre
properties (mostly pre-war) and new build properties. Growth
rates of city centre flats have been averaging 15-20% p.a.,
while in case of new build homes 10-12% growth was more
common last year. However, based on the desirability of
location and quality, the span is wider at around 5-20%.
Communist built properties - in particular panel block
constructions - have generally not seen much appreciation,
although the price drops experienced in 2004-5 seem to
have ceased and prices have stabilized last year.

Bratislava now features properties priced from just under
40,000 SKK/m2 (800 GBP/m2) up to 130,000 SKK/m2 (2,600 GBP/m2).

Comparable prices are unheard of outside the capital. Even
in the thriving towns of Trnava and Zilina property prices
reach up to a maximum of SKK 50,000/m2 (or 1,000 GBP/m2,
Trnava) and 60,000 /m2 (1,200 GBP/m2, Zilina), with average
prices coming to lower levels. Prices of communist built
flats in the two towns are under SKK 30,000/m2 (600 GBP/m2).

Limited supply
--------------

Although Slovakia (compared to recent years) is experiencing
somewhat of a mini-boom in construction, the country is
still at the very bottom of the construction scale in Europe.

While Ireland and Spain top the European construction rates
chart, Slovakia (along with Germany) holds the last position.
To compare, only 2.8 units were build in Slovakia for each
1,000 inhabitants as opposed to Ireland's 18.6 units per 1,000.

And so the country's chronical shortage of housing will hardly
be solved anytime soon. By government estimates nearly 50,000
new properties would need to be built annually to meet current
demands and catch up with the EU's average.

Slovakia with its 309 housing units per 1,000 inhabitants is
well below the EU's 450 hu per 1,000. However, the country
only has 13-15,000 properties built each year (out of which
nearly two thirds are family houses and the rest units in
apartment blocks).

The massive domestic demand coupled with strong shortage of
properties will continue to be the main factor pushing up
prices in coming years.

Increasing affordability
------------------------

Surveys in 2005 have shown that an average Bratislava inhabitant
needs to save for significantly fewer years to buy an average
property in the Slovak capital than those living for example
in Prague, as well as any western European capitals.

Today, the situation hasn't changed. While not all property
will be affordable to the agerage buyer, fast growing real
incomes as well as increasing use of mortgages are producing
new waves of buyers. Statists show a majority of buyers of
new built flats in Bratislava are in the early to late 20's.

With Slovak economy accelerating beyond all expectations
(8.3% GDP growth in 2006 and close to 9% predicted for 2007),
unemployment in continuous sharp decline and fast growing
prosperity and purchasing power, Slovakia presents some of
Europe's best fundamentals for property market's growth.

Slovaks' desire to own their home coupled with increasing
ease of obtaining mortgage finance at favourable conditions
will ensure an ongoing strength and buyoancy of the local
market and further price appreciation.

So, investors should see healthy returns in the next 5 years,
with prices of quality properties in popular locations on
the way up. This is particularly true in economically strong
regions, and will also increasingly be dependent on the
micro-location and quality or standards of the property.

Importantly for the investor, the Slovak property market
keeps being driven largely by domestic demand from local
home buyers. This is in sharp contrast to many other new
markets where prices have been inflated by large numbers of
foreign investors or speculators. The numbers of foreign
buyers in Slovakia are negligible compared to the domestic
purchasers.

As in previous years, the best performers from the capital
gains perspective are likely to be (construction) land,
classic city centre properties and new builds (in particular
in more sought-after locations).

Somewhat harder to predict is the development in other
regions and towns. While the likes of Zilina and Trnava
are already seeing a healthy growth (of around 8-12% p.a.
on good quality properties), other towns such as Nitra and
Trencin in western Slovakia, Banska Bystrica in central
Slovakia and Kosice (and Presov) in the east, may need to
wait for several more years yet to see their markets thrive.
As happened in the west of the country, the road will
typically need to be paved by significant foreign investments
(and improvement of the infrastructure necassary for such
investments; in particular in the east).

While it is out of scope of this general overview to go into
detail on specific locations, we welcome any questions you
may have.

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3) Fantastic Growth Potential - New Bratislava Deal

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If you have not yet secured your apartment in our excellent
new investment opportunity in central Bratislava, don't
wait any longer! Formal reservations are now open and
many units have already been allocated.

This exceptional opportunity combines the best features
essential for any successful property investment:

* highly sought-after central location
* top potential for capital appreciation
* best possible rental demand
* high quality at favourable m2 prices

Fantastic location

- centrally located on the border of BA II and BA I (districts)
and only a 5 minutes walk to the heart of the city.

Best potential for capital growth

- the city centre has outperformed other areas in terms of
price growth in any given year; high demand for properties
here stands in contrast to the very short supply (since
mostly older, classic pre-war blocks)

- surrounded by the most exciting regeneration zone ever
seen in Slovakia (with Central Europe's largest real estate
projects to change the face of this lucrative entry gate
to the Old Town district; creating high-end hotels, tallest
office tower, vast shopping complex in 2008-10)

Strongest rental demand in Bratislava

- centrally located properties have always enjoyed the best
demand from tenants and are easiest to let; (expected rental
yields of 6-7% p.a.)

Modern quality amidst classic stock

- 22 apartments and business studios featuring high standards
and all modern comforts

Excellent prices

- Extremely competitively priced for the area, the units
range between 55k - 140k GBP (including VAT).

Along with high capital growth potential and solid rental
demand the development offers another rare advantage to an
investor - a sought-after central location as well as new
modern standard.

For a full info pack or to secure your unit(s) please 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.
An exciting new apartment deal in one of the most sought-after
spots of Berlin has just been released! 1 and 2 bed apartments
in a beautifully renovated listed building are available from
just 48k GBP and let at 5% yields. We're also offering apartment
blocks, mixed-use buildings & commercial properties. Simply
email us your requirements to info@alphare.net.

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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

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