Slovakia Investment Property

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Slovakia Investment Property Newsletter
June 2007 - Issue # 32
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Welcome to the June issue of your Slovakia Newsletter.

After some good news on falling interest rates in the
last month's newsletter today we will take a closer look
at Slovak mortgages and their accessibility to foreign
buyers.

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. Fast Growth & Mega Investments
2. Funding a Slovak Property
3. Bratislava, an Investment Hotspot
4. Tell Us What You Think!

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

1) Fast Growth & Mega Investments

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Slovakia's Ministry of Finance increased its estimate of
GDP growth for 2007 to 8.8% (from originally estimated 8.1%).
The Ministry expects the employment rate in Slovakia to grow
by 2.9% this year. Similarly, the International Monetary Fund
(IMF) is predicting the Slovak economy to grow by 8.8% and
inflation to be down to 2.3% in 2007.

* * *

On 31 May Bratislava has had a new zoning plan approved at last.
Its preparation has taken 10 years. Until now development and
construction in the Slovak capital has been regulated by the
last zoning plan from 1976 (partially updated in 1993). A
new plan was badly needed in what is Slovakia's wealthiest
and most thriving construction and home buyers market.

* * *

Trnava will receive a further boost by yet more investments
- a new logistics park in the proximity of the Peugeot Citroen
car plant is to be built over 60 hectares. Meanwhile the
village of Voderady near Trnava will receive a 320 million
euro investment (in two stages) in the form of a new Samsung
manufacturing facility for LCD monitors. Samsung and suppliers
are to employ over 4,000 people in the new facility, to include
manufacturing and development activities. Production will
start in 2008.

* * *

Slovakia has been benefiting from EU funding at a growing
rate since 2004. The country has been a net receiver of
EU funds - 1.09 billion SKK in 2004, 6.31 in 2005, 11.06
in 2006, with estimates for this year at 16.03 billion SKK.

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2) Funding a Slovak Property

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The popularity of mortgage funding in Slovakia continues
to increase, with loans posting more than a 30% growth y/y.

Though interest rates have, after a few years of decline,
gone up by up to 2% in late 2005/6, they have not stopped
Slovak home buyers' thirst for bank funding.

In mid 2006 mortgage rates were starting at the 6% level
and reached over 7% for many applicants. This year mortgages
have been getting cheaper again. In April the National Bank
of Slovakia (NBS) cut the base rate by 25 bp to 4.25% p.a.
Average rates for new mortgages at present are around 6%
(higher for fixed rate loans).

The amount of approved mortgage loans went from SKK 39.6
billion in mid 2004 to SKK 87.9 billion by the end of 2006.
That translates to 45,605 mortgage contracts in mid 2004
and 85,366 at the end of 2006.

The potential of the Slovak mortgage market compared to
other European countries is massive. Thanks to the growing
popularity of mortgage funding among local home buyers the
Slovak mortgage market has been one of the fastest growing
in the EU in the last few years. Yet mortgage lending is
still much less widespread than in other EU markets. While
the volume of Dutch mortgages was higher than the country's
GDP and mortgages in Denmark and the UK coming close to
their respective national GDP, Slovak mortgages formed just
over 6% of Slovakia's GDP.

More than two years after their abolition the (new) Slovak
government has again introduced bonification of mortgages
for lower earners. It is however expected that most home
buyers will not qualify for the new subsidies, due to the
tight criteria for maximum allowed income and loan size on
the one hand (set by the government) and the lenders' loan
approval criteria on the other.

To qualify for the subsidy of 1.5% off the lender's standard
mortgage rate (to also be matched by a minimum of 1% off
by the lender; hence benefiting from at least 2.5% lower
rate than a standard non-subsidized mortgage), applicants
must meet the following requirements:

* age not over 35 years
* gross monthly income no more than 1.3 times higher than the
average national income (therefore limited to 27,470 SKK/month)
* maximum loan of 1.5 million SKK
* maximum 70% LTV

The problem is that people with low enough income to qualify
for the government subsidy will rarely pass the banks'
lending criteria. The majority of mortgage applicants are
in large cities such as Bratislava, however, the prices
of properties there are higher and hence a 1.5 million SKK
loan limit will make the product less useful to home buyers.
The best chances to make use of the subsidized loans have
joint applicants (eg. young couples) living in a region with
lower property prices - provided neither of them has a
monthly income higher than 1.3 times the national average.

It is also worth noting the bonification is only offered
for the first 5 years of the loan's term, after which the
interest rate switches to the lender's standard rate.

Mortgages less bureaucratic
---------------------------

In recent years taking out a mortgage has become a less
and less bureaucratic process for the applicants. This is
in part thanks to the credit registers now in operation,
allowing lenders to credit check the clients. The newest
addition to the approval process is a check with the
Social insurance office. This enables the lender to
directly confirm the income of the applicant, without
relying purely on supplied tax returns or pay slips that
clients could potentially falsify.

And for those who can't provide a proof of (sufficient)
income, a good news has come in form of a new mortgage
product introduced by one of the lenders (Tatra banka).
While at a slightly higher interest rate, it allows to
apply for a loan without submitting an income proof.
The condition is a good credit report. However, it is
worth noting that in some cases, when in doubt, the bank
may still request an additional (standard) income proof.
Tatra banka is so far the only bank in Slovakia offering
such novelty product.

Several banks now also allow for progressive or degressive
monthly payments, and many let clients make a larger
one-off payment (mostly up to 20% of the outstanding loan)
without the standard early repayment penalty.

Terms of mortgage loans range from 4-30 years (depending
on applicants age and preferences; all loans must be paid
off by age of 65). Interest rate options are typically
floating or 1, 5 or 10 year fixed.

The main charges associated with any Slovak mortgage are:

bank arrangement fee - 0.5-1%
account handling fee - 60-100 SKK/month
early repayment penalty - 3-5%

Standardly all applicants need to supply several documents
in order to apply for a mortgage with any of the local
lenders. These typically include proof of ID, proof of
income (P60s + pay slips + employment contract in case of
employees or last 2 years tax returns in case of self-
employed applicants), bank statements, as well as details
of financial situation (in particular monthly expenses,
other loans or regular payments, etc).

All lenders will also make a check with the credit register
in Slovakia, and more recently with the Social insurance
office to verify income (though the latter will only apply
to applicants employed in Slovakia rather than abroad).

Furthermore lenders will require a valuation of the property;
in many cases an internal valuation by the lending bank is
possible. Building insurance is a condition to any loan
secured on property, however, in certain cases lenders may
also require the applicant to take out other forms of
insurance (for instance a life cover).

Considered Slovaks have only had access to mortgages for
a few years the market has been developing at a very fast
pace, with loans becoming increasingly more sophisticated
and flexible to suit borrowers.

And as we all know, better accessibility of finance creates
a large supply of new buyers, who in turn keep the property
market thriving and the prices growing.

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3) Bratislava, an Investment Hotspot

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Slovakia is being tipped by the Global Property Guide as
the new property investment hotspot.

Inexpensive house prices, strong economic growth, low income
tax, no capital gains tax (after 5 year holding) and very
low transaction costs are the main reasons for the Guide's
enthusiasm for Slovakia and in particular the capital
Bratislava.

If you are looking to grab your piece of the action, you
will be pleased to hear about our latest investment
opportunity in Bratislava. The development has been
proving very popular and only a few units are now
available.

With a highly sought-after location in central Bratislava
this exclusive opportunity offers highest potential for
strong capital appreciation as well as best possible
rental demand.

Strategically positioned on the border of BA II and BA I
districts, a mere 5 minutes walk to the heart of the city,
the development offers high quality and modern standards
of living at prices lower than the area's average.

Units range between 55k - 140k GBP (including VAT) and
completion is expected in mid 2008.

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 ranging from
300k to 80 million GBP. 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