Slovak Republic: Overview

RENTAL YIELDS

Last Updated: Jul 11, 2008

Yields down sharply in past 2 years in Bratislava, from 10.1% to 5.2%

Gross rental yields in Bratislava are now moderate at an average of 5.2%. This represents a significant decline in yields over the past two years. The reason? Rents have not increased, or only increased slightly, while sale prices have risen considerably.

In central districts of Bratislava, Global Property Guide research in 2006 found that sale prices ranged from €1,200 to €1,300 per sq. m. However by July 2008, our most recent survey, prices had increased considerably to €2,490-€3,597 per sq m. This is a significant price increase, consistent with the available official national and regional statistics.

According to Collier’s Real Estate Review, the floor price of land plots in one of the most expensive parts of Bratislava (Bratislava I) increased considerably in 2007, causing an increase in average prices of approximately 50%.

Meanwhile rents appear to have remained almost unchanged from 2006 to 2008.

Nevertheless, end-user demand is still not being met by supply, according to local realtors, and the market remains very tight. At the high end, the tremendous expansion in supply seen in other Eastern European capitals has not taken place in Bratislava, according to local realtors.

Stare Mesto, the city centre, boasts some of the most expensive property in Bratislava. Gross rental yields on 120 sq. m. and 180 sq. m. apartments in Stare Mesto are at around 4.5%, according to Global Property Guide research. Gross rental yields on smaller units of 60 sq.m are higher, at 6.10%.

Land prices in other parts of the city also increased, for instance in the Ruzinov area, where most accommodation is in apartment blocks.

The price range for apartments situated in these less high-rent districts (Bratislava II & III) range from €96,920 to €364,480, according to our research, with gross rental yields of 5.5% and 4.9% respectively.

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TAXES AND COSTS

Last Updated: Aug 15, 2008

Rental income tax is moderate in Slovak Republic

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	9.3%	13.0%	13.6%
Click here to see a worked example
Source: Disclaimer

Rental Income: Although rental income is subject to a flat 19% tax rate, this is levied upon net and not gross income. Effectively this means that a married couple declaring receipts separately would pay around 9.3% in tax on gross income of €1,500 per month.

Capital Gains: Real estate held for more than five years is exempt from capital gains tax.

Inheritance: Inheritance taxes were abolished as of 01 January 2004.

Residents: Personal allowances and certain tax bonuses are available to residents.

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BUYING GUIDE

Last Updated: Apr 03, 2007

Roundtrip buying costs are very low in Slovakia

Total roundtrip buy-sell costs are very low, between 2% and 5.5% of property value. A positive factor was the January 2005 abolition of transfer tax. Remaining cost for the buyer are the agent’s commission (2% - 5%) and miniscule registration fees (0.01% - 0.5%)

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LANDLORD AND TENANT

Last Updated: Jul 04, 2006

Slovak law is neutral between landlord & tenant

Rent: Rent control was abolished in Slovakia from 2007, and previously did not apply to individually-owned apartments.

Tenant Security: The tenant can break the contract at any time by giving three months’ notice without needing to give a reason, while the landlord needs substantial reasons to break an ongoing contract.

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ECONOMIC GROWTH

Last Updated: Nov 15, 2008

One of the fastest growing economies in Europe

Slovakia, with a population of 5.5 million, is one of the most successful transition countries in Central Europe with GDP per capita of US$13,857. Established after the nation seceded amiably from Czech Republic in 1993 (the two countries were formerly known as Czechoslovakia), its stable polity and liberal market economy belie its previous 41-year communist rule.

Slovakia experienced slow economic growth from 1994 to 1998, when reforms were initially stalled. From 1998 to 2004, it benefited from eight years’ reform under the centre-right coalition led by Premier Mikulas Dzurinda whose reform package won praise from international organizations. Since then, the economy has consistently improved, facilitating the country’s membership of the Organization for Economic Cooperation and Development (OECD) in 2000 and accession to EU and NATO in 2004.

Then in December 2007, Slovakia has become a full member of the Schengen Zone, which allows passport-free travel across the 24-member European nations.

However in June 2006 a new coalition government was elected, reflecting a ‘protest’ vote by those left out of Slovakia’s economic growth. Despite being an alliance of left-leaning organizations, the new government left previous reforms in place.

Real GDP growth reached 10.4% in 2007, following 8.2% for 2006, 5% for 2005, and 5.5% for 2004. In 2008, real GDP is expected to grow by 7.4%. The Slovak Republic is now one of the fastest growing economies within the EU and OECD. Registered unemployment rate was down to 7.4% in August 2008 from 16.5% at the beginning of 2004.

Inflation in 2007 was 2.8%, following 4.4% in 2006 and 2.8% in 2005, having dropped from a 12% in 2000. However, due to rising energy and commodity prices, annual inflation accelerated to 5.4% in September 2008, the highest level since December 2004, according to Slovak Statistics Office.

The budget deficit was reduced from 10% of GDP in 2000 to just 1.5% of GDP in 2003. It rose to 3.8% in 2006 but declined to 2.2% in 2007.

As a testament to its economic strength and fiscal and monetary discipline, Slovakia was given the green light to adopt the euro on January 1, 2009 ahead of its neighbors, the Czech Republic, Hungary, and Poland.