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The Slovak real estate market has experienced enormous development in recent years. The fast growing economy and political and social stability brought a real boom of property prices, which have been rising steadily over the last few years. However, Bratislava is still the probably most undervalued EU capital, with price levels well below other comparable cities. Most experts expect prices to continue to climb, predicting a 10 - 15% annual growth in the next 3 - 5 years.
Bratislava's real estate market has a lot to offer investors. Although a significant part of commercial is owned by foreigners (mostly German, Austrian and US property funds as well as Irish and Italian investors), Slovakia's residential market is driven largely by domestic demand. There is huge demand from the local Slovak population, in particular since the first mortgage finance products were introduced to the market a few years ago. The mortgage market is developing rapidly and allowing more and more Slovaks to purchase their homes.
Slovakia, and Bratislava in particular, has a massive shortage of housing stock. At 309 per 1,000 inhabitants, the number of dwellings in Slovakia falls well below the EU average of 450 dwellings per 1,000. As such, it is quite usual for several generations of one family to live in the same unit. Much of the housing is represented by communist built concrete panel blocks. Although some have been undergoing renovation, many are run down and of poor standard. With increasing wealth and growing purchasing power, Slovaks are keen on new higher standard housing. In particular, there is a huge demand for new built flats.
Compared to other EU countries, Slovakia lags considerably behind in housing construction. The year-on-year increase in housing in Slovakia is only 1.2 dwellings per 1,000 inhabitants. The shortage of properties and massive domestic demand will continue to push property prices up significantly, particularly prices for new built flats in popular regions. Experts say real estate in Bratislava will continue to offer substantial capital growth and excellent returns over the next years.
While in the Czech republic many tenants still live in apartments with regulated rents, in Slovakia rent controls have been abolished (very few exceptions apply, for some tenancies that started before 1989). There are two main categories of tenants in Slovakia – foreign expat tenants and companies; and local, mostly student and lower income workers. The first category has, since mid 1990s, created a very strong rental market in Bratislava (with strongest demand for good quality property in Bratislava I, Old Town) and newly also in locations such as Trnava and Zilina (areas receiving large foreign investments). Rental yields for quality apartments in Bratislava are typically 6-8% (up to 10% in Trnava). Low income tenants and students will typically rent cheap, often communist built apartments, frequently sharing a property. While in many EU countries as much as 50% of population live in rented accommodation, in Slovakia this is only 6%. Although it is difficult to predict the development of the local rental market, the tendency towards owner-occupancy has been very strong in Slovakia, and with increased availability of (cheap) mortgages Slovak middle class population always opts for buying rather than renting property.
The Slovak property market opened doors to foreigners on
1 May 2004.
As opposed to restrictions on purchase in most of the other new EU members, all foreign citizens who wish to buy property or land (except arable and forest land) in Slovakia are able to do so directly, without having to set up a company and have a local legal signatory.
There has rarely been such combination of favourable factors in the property market in Europe. The time to benefit from this
historic opportunity is NOW.
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