Slovakia Investment Property

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Slovakia Investment Property Newsletter
March 2008 - Issue # 40
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Welcome to the March edition of your Slovakia newsletter.

In recent issues we have focused on the fast growth in
property prices in the Slovak capital Bratislava, driven
by the huge local demand from home buyers, strong growth
in wages and increasing prosperity.

Today we will look at another phenomenon - the new satellite
villages springing up around Bratislava. While a vast majority
of the population likes living in the city with all of its
amenities at the doorstep, there are also many who consider
owning a family house (rather than the typical city flats)
a better - and often cheaper - option.

So which settlements are the most popular, which offer the
lowest prices and, are they any good for a property investor?

As usual, if 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. Record Breaking Growth Over 10% in 2007!
2. A House for the Price of a Flat
3. Tell Us What You Think!

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

1) Record Breaking Growth Over 10% in 2007!

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Economic growth in Slovakia in 2007 was a record breaking
10.4% (according to the Slovak Statistical Office).

Average monthly wage in 2007 came to SKK 20,146 (622.08 EUR),
a 7.2% y/y increase. Real wages (inflation adjusted) increased
by 4.3% (Slovak Statistical Office).

* * *

Bratislava, the second richest region in the new EU (after
Prague) has a GDP per capita at 129% of the EU average.

* * *

The ratings agency Standard & Poor's changed its outlook on
Slovakia from stable to positive amidst expectations of euro
adoption in 2009. S&P's affirmed Slovakia's "A" sovereign
credit rating and raised to "AA+" (from "AA") the transfer
and convertibility assessment of the country.

"In conjunction with the strong currency and moderate inflation
rate, Slovakia is expected to satisfy the Maastricht criteria
for EMU (European Monetary Union) membership" S&P stated.

* * *

Slovakia's central bank (National Bank of Slovakia) predicts
economic growth in 2009 to exceed 7% - a slowdown from the
last couple years but still an extraordinary figure given
the situation in the EU and US.

Slovak economy is optimally positioned to ride out the global
economic slowdown. Accordingly Slovak GDP growth is expected
to be over 8% and 7% in 2008 and 2009 respectively, compared
to the EU and US which may barely register more than 1-1.5%
growth.

* * *

The Slovak crown (SKK) appreciated further and on 4 March
reached a new historic high of 32.50 SKK/EUR, in reaction to
an improved outlook rating and strong economic indicators.

* * *

The income from inbound tourism was SKK 3.99 billion (121.7
million euro) in January, a y/y increase of 18.8%. (Data
from the Department for Tourism at the Ministry of Economy)

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2) A House for the Price of a Flat

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Lower prices, lack of amenities
-------------------------------

Although most inhabitants of Bratislava (and other larger
Slovak cities) have lived all their lives in apartments,
there are some that would rather put their savings (or loans)
into a family house with a small garden.

The percentage of those who can afford a house in the capital
(perhaps with the exception of small older homes on the
outskirts) is negligible - in the city there are almost no
houses apart from the very high-end Castle Hill and Horsky
park areas (with villas usually starting at several millions
of euros each), the not much cheaper Koliba and the significantly
more affordable but also generally a lot less desirable older
houses in some of the outer districts of Bratislava (mostly
ranging from approx 150-300k GBP or 200-400k euros, depending
on size, location and standard).

Prices of a land plot for a family house in Bratislava (and
such parcels are rare to find in the city) come at SKK 4-20k+
per meter squared (100-500+ GBP/m2) - lowest in less popular
areas such as Podunajske Biskupice, Lamac, Vajnory, Devinska
Nova Ves, medium in Raca, Devin, and highest in Koliba, Slavin,
Slavicie udolie, Horsky park, Stare mesto.

Areas with predominantly family homes such as Zahorska Bystrica
(the last suburb in the north of Bratislava) or Rusovce and
Jarovce (close to Austrian and Hungarian borders) can almost be
considered satellites of the capital, although these originally
separate villages are now part of the city.

The solution for the needs and desires of home buyers looking
for a moderately priced house are the satellite villages that
have been springing up within 10-30km from the capital. Many
of these small old villages have been growing exponentially
in the last 5 years due to the new house developments and
today have between 1,000 and 5,000 inhabitants each.

Developers tend to split a larger parcel into dozens or even
hundreds of small ones and also offer to build various types
of homes (with difference in size and price) for the buyers.

Houses are mostly detached or semi-detached and often stand
near each other in order to efficiently use the increasingly
expensive land (typically homes have a plot of 300-600 m2).

Such family homes come often at similar prices as flats in
Bratislava, but the buyers have to face longer commute times
(and bad traffic in rush hour), unavailability of public
transport into the city, lack of shopping and entertainment
facilities nearby, etc. The morning commute into the capital
- where a large majority of the inhabitants of the surrounding
villages works - often takes well over an hour by car despite
the relatively short distance.

While in recent years many buyers have been attracted by the
comparatively low prices, today some are coming back to live
in the city after realizing that prices and quiet environment
are less important to them than the comforts of city living.

Satellites in all directions
----------------------------

So what are the most popular settlements and how do they
compare in prices?

Zahorie - a region to the north of Bratislava - offers cheaper
land prices than the region around Pezinok on the other side
of the Carpathian mountains. There are few large developments
here but plenty of small ones in Stupava, Borinka, Marianka,
Jablonove, Lozorno, etc. Prices range from SKK 2-4k/m2 (or
50-100 GBP/m2) for land with engineering networks.

More popular and also more expensive is the area of Pezinok
and Modra to the north-east of Bratislava. The attractions
are the countryside with the characteristic vineyards as well
as better facilities in the towns of Pezinok (20km from the
capital) and Modra, incl. schools, shops, restaurants, banks.
Land parcels and new houses have been sold in Svaty Jur,
Limbach, Pezinok, Jablonec, Vinosady, Vinicne, Modra, etc.
Prices for land with engineering networks range around SKK
3-5k/m2 (75-125 GBP/m2).

The most accessible area and also nearest to the capital is
the location to the east (around the highway Bratislava-Senec
-Trnava). Building activity has been strong in villages of
Ivanka pri Dunaji, Most pri Bratislave, Cierna Voda and
Chorvatsky Grob, Bernolakovo, Zalesie, Nova Dedinka, Tomasov,
etc. Prices are around SKK 3-4k/m2 (75-100 GBP/m2) of land.

Cierna Voda (part of village Chorvatsky Grob) has the advantage
of being the only satellite of Bratislava with public transport
links (bus) into the city. Being just 10km from the capital,
many hundreds of new houses have been built and sold here in
the last few years. New projects will bring a few thousand
of new houses in the next 3-5 years. Land plots can be had
at SKK 3-5k/m2. A family home of 100 m2 costs from 100k GBP.

While all these satellites have seen almost exclusively the
construction of family homes, flats are being built in the
town of Senec (30km east of the capital) that offers the
comforts of shops, schools, entertainment as well as lakes
and a water park.

The cheapest land can be found in the areas south-east of
Bratislava towards Samorin and Dunajska Streda. Consequently
a number of new homes have recently been offered here in the
villages of Rovinka, Dunajska Luzna, Miloslavov, Alzbetin Dvor,
Kalinkovo, Hviezdoslavov, Kvetoslavov and the small town of
Samorin (23km from BA). In some of these villages whole new
residential quarters of family houses have been created in
recent years. Prices of land start from under SKK 2k/m2.

The low prices are partly due to lesser attractivity of this
area thanks to the Slovnaft oil refinery (south-east of BA
and north-west of Rovinka), strongly rural character with
little amenities (with the exception of the town of Samorin
with some schools and shops). Many Slovaks also dislike the
large percentage of Hungarian speaking population (due to
close proximity of the Hungarian borders).

Overall, it is estimated that about 700 new houses under
construction (mainly detached and a smaller percentage of
semis) in these satellite villages have come onto the market
in the last 6 months. These new built homes sell at prices
between SKK 20-40k/m2 (500-1,000 GBP/m2), therefore house
+ land come to SKK 3-9 million (incl. VAT; 75-225k GBP).

As those moving out of Bratislava are generally looking for
lower prices, the standards of fittings in these new home
developments are mostly average to more simple (compared
to apartment developments in the capital).

Affordable Austria and Hungary
------------------------------

More recently the locations across the (now extinguished)
borders to Austria and Hungary have become increasingly
attractive for house buyers. A drive into the centre of
Bratislava from the village of Rajka (Hungary, 25 km from
the Slovak capital) or the villages of Wolfsthal, Kitsee
and the town of Hainburg (all in Austria and within 10-20km
from BA) takes less time than from the Slovak satellites.

The recently abolished borders have made the commute even
faster. Prices significantly lower than those in Bratislava
are also attracting Slovak house buyers. It's expected that
the majority of those moving to Rajka are Slovaks of Hungarian
origins while the Austrian villages are of particular interest
to Slovaks working in Vienna.

Today around 25% of inhabitants of Rajka are Slovak nationals.
A majority of them have moved there from the Bratislava
district of Petrzalka, south of Danube river and characterized
by its massive communist built housing estates.

As a result prices of homes in Rajka have risen rapidly in
the last few years. 4-5 years ago an older 3-4 bed house was
less than SKK 2 mil (50k GBP), today the same property would
cost the double. In spite of high Hungarian transfer taxes
(Slovakia has none), higher property taxes (than in Slovakia)
and higher bureaucracy, prices have been growing by 15-20%
thanks to the immigrants from the Slovak capital.

The Austrian villages and towns close to the Slovak border
have also happily welcomed Slovak property buyers who are
helping to keep the local markets alive. Most of demand for
flats and houses in Wolfsthal, Kitsee or Hainburg is now
coming from Slovaks moving here from Bratislava (where they
usually continue to work and socialize). The low property
prices on the Austrian side are attracting mainly young
buyers in their twenties. Good 1-2 bed flats in the medieval
town of Hainburg can be had for just SKK 2-3 million (50-75k
GBP) - less than half of a similar apartment in the Slovak
capital.

Plots for family homes in Hainburg cost around sKK 3k/m2
and less in other Austrian villages. Either way, that is
lower than prices in most satellite villages on the Slovak
side (from which commuting to the capital usually takes longer
time). Austrian developers are now starting to market their
houses in locations near the border to Slovak home buyers
from Bratislava who have often higher purchasing power than
local Austrian buyers in these townships. (The same would
not be true in Vienna of course.)

Austrian banks are also keen to lend to Slovak buyers moving
in from Bratislava who have incomes at similar levels as the
local population. There are now even plans for a regular
public transport link between Hainburg and Bratislava.

Who are the migrants?
---------------------

A large majority of the people moving out to satellite
villages and townships are those who came to live in the
capital from other regions of Slovakia in search of work.
Many of these migrants have originally lived in small towns
and villages before coming to live as singles in a rental
flat or own small apartment in Bratislava. Once they build
a family (generally in their 30s) they want to return to
live in a more familiar and quiet village environment -
as offered by the satellites within 30km of Bratislava.

To a lesser extent some older people are selling their
communist built flats and moving to a small family house
in a quiet village type area. According to developers of
the new house projects a large part of Bratislava buyers are
coming from the unpopular city areas of Petrzalka and Dubravka
(famous for their massive communist housing estates).

And what about investors?
-------------------------

Investors are generally better advised to put their money
into well located and good quality city apartments. Demand
from local home buyers for this type of property is massive
and will continue very strong in the future, allowing for
easy resale as well as good appreciation. This is even more
true for those looking to buy-to-let.

Land prices (and consequently house prices even though to
a lesser extent than land) in the settlements around the
capital have been rising in value for several years. So those
who have purchased parcels of land 3-4 years ago would have
seen them appreciate by around 100%.

On the other hand, there is very little (if any) demand
for rental property in these areas. Tenants (whether foreign
or Slovak) prefer city apartments, generally the more central
the better. Homes in the satellite villages are therefore
not suitable for rental purposes and so not of much interest
to a typical buy-to-let investor.

However, those looking for land investment or interested
in development may still find such projects profitable, in
spite of recent price rises.

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3) 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