Slovakia’s housing market remains depressed, affected by the economic slowdown and Slovakia’s increased budget deficit.
During the year to end-Q3 2011, the average price of residential properties in Slovakia dropped by 4.3% to €1,248 per square metre (sq. m), according to the National Bank of Slovakia. When adjusted for inflation, property prices actually fell by 7.9% over the same period. On a quarterly basis, property prices fell by 0.6% (-0.8% inflation-adjusted) in Q3 2011.
But the national figures conceal local property price changes. The region of Zilina experienced the highest price fall of 5.2% y-o-y to Q3 2011. It was followed by the regions of Banska Bystrica (-4.8%), Bratislava (-4%), and Trnava (-1.3%).
On the other hand, property prices increased in Trencin region (4.2%), Kosice (3.2%) and Nitra (1.3%) during the year to Q3 2011. House prices are unchanged in Presov region.
The average price of flats fell by 2.1% y-o-y to €1,312 per sq. m. in Q3 2011 while the average price of houses dropped by 5.9% to €1,104 per sq. m over the same period.
Bratislava region has the most expensive housing in the country at €1,671 per sq. m. in Q3 2011 while Nitra region has the cheapest at €641 per sq. m.
The housing boom in Slovakia lasted from 2006 to Q2 2008, with rises ranging from 14% to 35% per annum. The surge stopped in late 2008 due to the adverse impacts of the global financial meltdown. Since then, prices have been dropping continuously. Currently, house prices are down by 19.4% (-25% inflation-adjusted) from the peak seen in Q2 2008.
Consumer demand remains weak and the country’s unemployment rate rose to 14.4% in 2010 from 12% in 2009 and 9.6% in 2008. In Q2 2011, Slovakia’s unemployment rate was back down to 13.1%. In 2011, unemployment is expected to be 13.4%.
During the 2009 global crisis, Slovakia's economy contracted by 4.7%, a sharp decline from GDP growth of 6.17% in 2008. Thanks to renewed export demand, the economy grew by 4% in 2010.
However, the economic outlook in the eurozone remains bleak, so the country’s real GDP growth rate in 2011 is expected to slow to 1.7% from earlier projections of 3.4%, according to the Finance Ministry.
The budget deficit is expected to rise to 4.6% of GDP this year, higher than the earlier target of 3.8%.
During the year to end-Q3 2011, the average price of residential properties in Slovakia dropped by 4.3% to €1,248 per square metre (sq. m), according to the National Bank of Slovakia. When adjusted for inflation, property prices actually fell by 7.9% over the same period. On a quarterly basis, property prices fell by 0.6% (-0.8% inflation-adjusted) in Q3 2011.
But the national figures conceal local property price changes. The region of Zilina experienced the highest price fall of 5.2% y-o-y to Q3 2011. It was followed by the regions of Banska Bystrica (-4.8%), Bratislava (-4%), and Trnava (-1.3%).
On the other hand, property prices increased in Trencin region (4.2%), Kosice (3.2%) and Nitra (1.3%) during the year to Q3 2011. House prices are unchanged in Presov region.
The average price of flats fell by 2.1% y-o-y to €1,312 per sq. m. in Q3 2011 while the average price of houses dropped by 5.9% to €1,104 per sq. m over the same period.
Bratislava region has the most expensive housing in the country at €1,671 per sq. m. in Q3 2011 while Nitra region has the cheapest at €641 per sq. m.
The housing boom in Slovakia lasted from 2006 to Q2 2008, with rises ranging from 14% to 35% per annum. The surge stopped in late 2008 due to the adverse impacts of the global financial meltdown. Since then, prices have been dropping continuously. Currently, house prices are down by 19.4% (-25% inflation-adjusted) from the peak seen in Q2 2008.
Consumer demand remains weak and the country’s unemployment rate rose to 14.4% in 2010 from 12% in 2009 and 9.6% in 2008. In Q2 2011, Slovakia’s unemployment rate was back down to 13.1%. In 2011, unemployment is expected to be 13.4%.
During the 2009 global crisis, Slovakia's economy contracted by 4.7%, a sharp decline from GDP growth of 6.17% in 2008. Thanks to renewed export demand, the economy grew by 4% in 2010.However, the economic outlook in the eurozone remains bleak, so the country’s real GDP growth rate in 2011 is expected to slow to 1.7% from earlier projections of 3.4%, according to the Finance Ministry.
The budget deficit is expected to rise to 4.6% of GDP this year, higher than the earlier target of 3.8%.
Analysis of Slovak Republic Residential Property Market »
RENTAL YIELDS
Last Updated: Jul 29, 2011
The Slovak property market saw a dramatic increase in prices between 2004 and 2008, accompanied by strong appreciation of the Koruna against the Euro, in expectation of Euro adoption in 2009. Since then, dwelling prices have declined. Rents have also fallen significantly. The price falls seem to be coming to an end.
Buying prices for apartments in Bratislava 1, 11, and 111 are typically around 2,000 to 3,000 Euros per square metre, the highest prices being paid in Bratislava 1.
However, from an investment perspective the attractions of Slovakia are much diminished. Gross rental yields of over 10% in the heady days of 2004-2006 are no more. Now, the smallest central Bratislava apartment may yield 6.5%, but this is a very unusual figure. Gross rental yields of 4% are much more typical, and empty periods are commonly reported. In Bratislava 11 and 111, gross rental yields range between 4.5% and 6.3%.
Buying prices for apartments in Bratislava 1, 11, and 111 are typically around 2,000 to 3,000 Euros per square metre, the highest prices being paid in Bratislava 1.
However, from an investment perspective the attractions of Slovakia are much diminished. Gross rental yields of over 10% in the heady days of 2004-2006 are no more. Now, the smallest central Bratislava apartment may yield 6.5%, but this is a very unusual figure. Gross rental yields of 4% are much more typical, and empty periods are commonly reported. In Bratislava 11 and 111, gross rental yields range between 4.5% and 6.3%.
TAXES AND COSTS
Last Updated: Aug 29, 2011
Rental Income: Net rental income is taxed at a flat rate of 19%. 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: Capital gains are generally taxed at 19%.
Capital gains realized from selling properties held for more than five years may be exempted from capital gains tax, subject to certain conditions.
Inheritance: Inheritance taxes were abolished as of 01 January 2004.
Residents: Residents taxed on their worldwide income at a flat rate of 19%.
Capital Gains: Capital gains are generally taxed at 19%.
Capital gains realized from selling properties held for more than five years may be exempted from capital gains tax, subject to certain conditions.
Inheritance: Inheritance taxes were abolished as of 01 January 2004.
Residents: Residents taxed on their worldwide income at a flat rate of 19%.
BUYING GUIDE
Last Updated: Apr 03, 2007
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%)
LANDLORD AND TENANT
Last Updated: Jul 04, 2006
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.
ECONOMIC GROWTH
Last Updated: Nov 26, 2011
Slovakia’s economic growth slowing
Slovakia is one of Eastern Europe’s most successful transition countries (GDP/cap of US$16,100 in 2010). Born in 1993 after seceding amicably from the Czech Republic (the two countries were formerly known as Czechoslovakia), it has a stable polity and liberal market economy.Slovakia benefited from eight years’ reform under the centre-right coalition led by Mikulas Dzurinda (1998-2004) whose reforms won praise from international organizations, and who oversaw EU and NATO entry.
One of the most famous characteristics of the Slovak economy is its ‘flat tax’ of 19% on income, consumption, and corporate profits, operative since 2004. “It just works!” explained former minister of finance Ivan Miklos to a Cato Seminar.
The economy’s rapid growth facilitated the country’s membership of the Organization for Economic Cooperation and Development (OECD) and the European Union (EU) in 2004. In December 2007 Slovakia became a full member of the Schengen Zone, allowing passport-free travel in the 24-member European nations.
Real GDP growth reached an impressive 10.4% in 2007. In 2008 there was 6.17% growth, and then a collapse with the crisis to a 4.66% GDP contraction in 2009. The economy recovered quickly with a GDP growth rate of 4% in 2010.
In the third quarter of 2011, annual GDP growth rate slowed to 2.9% from 3.5% in the previous quarter, with the Eurozone debt crisis dampening demand for Slovakia’s export products. Because of this, the Finance Ministry revised the country’s economic 2011 growth forecast to 1.7%, from the earlier projections of 3.4%.
"Economic growth in Slovakia is slowing down because of the debt crisis and the emerging recession in Europe and the world," said interim Finance Minister Ivan Miklos.
Due to the worsening economic outlook, the budget deficit is expected to rise to 4.6% of GDP this year, higher than the target of 3.8%. The government is still dedicated to reduce the deficit to 3% of GDP in 2013, which is a commitment under the EU’s Maastricht criteria.
The country’s unemployment rate rose to 14.4% in 2010 from 12% in 2009 and 9.6% in 2008. In 2011, unemployment is expected to fall slightly to 13.4%, according to the IMF.
In the June 2010 Parliamentary elections, Iveta Radicova’s centre-right coalition, led by the Slovak Democratic and Christian Union (SDKU), won power from Prime Minister Robert Fico’s centre-left coalition.
New Prime Minister Radicova has made restoring the country's public finances her government's main priority. She also promised to return Slovakia to the high growth rates it previously enjoyed.
However, Radicova lost a confidence vote in the Parliament last October 2011 because of her government’s support for the European Financial Stability Fund, leading to the fall of her government. An early parliamentary election will be held on March 2012.
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