Slovakia’s house prices in freefall

After an eight-year house price boom, Slovak Republic’s residential property market is now struggling, amidst falling demand. 

The nationwide average residential property price fell by 6.48% to €2,498 (US$2,716) per square meter (sqm) during the year to Q2 2023, based on figures from the National Bank of Slovakia (NBS). It was the first y-o-y decline since Q3 2014 and the biggest fall in thirteen years. When adjusted for inflation, property prices actually plummeted by 16.64%.

Slovak Republic’s house price annual change

During the latest quarter, nationwide property prices dropped 2.27% (-3.95% in real terms) q-o-q.

In Bratislava region, which has the country’s most expensive housing, residential property prices were down by 7.79% y-o-y to €3,138 (US$3,385) per sqm in Q2 2023, after falling slightly by 0.84% in Q1 2023, and rising strongly by 11.66% in Q4 2022, 19.33% in Q3 2022 and 22.67% in Q2 2022. Quarter-on-quarter, prices in the region dropped 2.03% in Q2 2023.

All other regions saw either falling house prices or a sharp slowdown in house price growth during the year to Q2 2023.

  • Kosice experienced the biggest decline in house prices of about 10.09% y-o-y to an average of €2,111 (US$2,277) per sqm, a sharp turnaround from an annual surge of 33.71% in Q2 2022 and the worst showing since the global financial crisis.
  • In Trnava, house prices rose by a minuscule 0.21% y-o-y to €1,869 (US$2,016) per sqm in Q2 2023, a sharp slowdown from the prior year’s 31.99% increase.
  • In Nitra, house prices rose by a modest 3.19% to €1,454 (US$1,569) per sqm in Q2 2023, following y-o-y increases of 10.38% in Q1 2023, 15.96% in Q4 2022, 21.04% in Q3 2022 and 23.92% in Q2 2022.
  • In Trencin, house prices fell by 2.47% to €1,579 (US$1,703) per sqm in Q2 2023 from the previous year, in contrast to a y-o-y growth of 26.09% in the same period last year.
  • In Zilina, house prices dropped 5.33% y-o-y to €1,953 (US$2,107) per sqm, in contrast to a strong annual increase of 26.72% in Q2 2022 and the first decline since Q4 2015.
  • In Banska Bystrica, house prices fell by 5.43% y-o-y to €1,708 (US$1,843) per sqm in Q2 2023, in stark contrast to a strong increase of 35.18% in the same period last year.
  • In Presov, house prices fell by 6.13% y-o-y to €1,913 (US$2,064) per sqm, following a 28.83% surge in Q2 2022. It was its worst showing since Q1 2015.

Slovak Republic Average Residential Property Prices graph

The previous housing boom in Slovakia lasted from 2006 to Q2 2008. The surge stopped in late 2008, and in following years prices either fell or only increased a little. House price growth started to strengthen again in 2016 and has been rising strongly until last year.

Slovakia’s housing market is projected to continue its downward momentum during the remainder of the year, amidst weak property demand and a slowing economy.

There are no legal restrictions on foreigners buying buildings in Slovakia.

HOUSE PRICES IN SLOVAK REPUBLIC, ANNUAL CHANGE (%)
Year Nominal Inflation-adjusted
2009 -12.31 -12.70
2010 -2.31 -3.37
2011 -2.45 -6.66
2012 0.57 -2.81
2013 -2.25 -2.75
2014 0.66 0.70
2015 2.21 2.71
2016 6.48 6.59
2017 4.81 2.93
2018 7.67 5.36
2019 6.32 3.34
2020 16.03 14.28
2021 24.88 18.37
2022 15.00 -0.16
Sources: National Bank of Slovakia, Global Property Guide

During 2022, economic growth was relatively subdued, as strong private consumption was offset by poor exports and government spending. Real GDP growth was recorded at only 1.7% last year, a slowdown from the prior year’s 3% expansion.

Slovakia’s economy is expected to remain weak this year, with a projected growth of another 1.7%, according to the European Commission. The International Monetary Fund (IMF) is even more pessimistic, with economic growth forecast for the country at just 1.3% in 2023.

HOUSE PRICE CHANGES (Q1 2005-Q2 2023)
  House price boom
(Q1 05-Q4 08)
Global financial crisis, eurozone debt crisis
(Q1 09-Q4 15)
Economic growth
(2016-19)
Covid-19 pandemic
(Q1 20-Q4 21)
Economic recovery, high inflation
(Q1 22-Q2 23)
SLOVAKIA 78.19 -12.81 27.76 38.48 -0.48
Bratislava 70.69 -6.13 24.24 34.16 -2.85
Trnava 65.23 -15.83 36.53 29.67 9.55
Nitra 111.08 -29.40 65.29 38.56 11.85
Trencin 177.00 -22.13 55.26 35.71 4.29
Zilina 122.97 -17.13 55.20 45.06 6.84
Banska Bystrica 124.67 -14.06 14.15 58.50 4.08
Kosice 118.11 -3.44 11.65 78.21 -5.93
Presov 77.76 -22.15 44.28 63.33 1.76
Sources: National Bank of Slovakia, Global Property Guide

Apartment prices are now falling

Apartments registered an annual price decline of 8% in Q2 2023 to an average of €2,711 (US$2,924) per sqm, in stark contrast to a y-o-y growth of 28.19% in the same period last year, according to the NBS. It was the first y-o-y fall in nine years and the worst showing since Q1 2010.

  • 1-room: prices fell by 6.9% to €3,083 (US$3,325) per sqm during the year to Q2 2023, in contrast to a 26.5% surge in the same period last year
  • 2-room: prices were down by 8.6% to €2,828 (US$3,050) per sqm during the year to Q2 2023, following a huge 29.2% increase in Q2 2022
  • 3-room: prices fell by 8.4% y-o-y to €2,515 (US$2,712) per sqm in Q2 2023, after increasing strongly by 27.4% in Q2 2022
  • 4-room: prices dropped 7.9% y-o-y to €2,520 (US$2,718) per sqm in Q2 2023, in contrast to a strong growth of 26.9% in the previous year
  • 5+-room: prices fell by 12.5% y-o-y to €2,589 (US$2,792) per sqm, from an annual increase of 26.8% in the prior year

 Houses also declined in value by a modest 2.11% to €1,945 (US$2,098) per sqm during the year to Q2 2023, in contrast to a y-o-y increase of 19.05% in the same period last year.

Slovak Republic Residential Property Prices by Type graph

Residential construction activity slowing

In 2022, the number of housing permits fell by 16.2% y-o-y to 19,201 units, in stark contrast to a 20.3% growth in the prior year, according to the Statistical Office of the Slovak Republic. Similarly, housing starts were down 15.9% y-o-y to 20,608 units and completions dropped 2.1% to 20,220 units over the same period.

The trend continued in Q1 2023, except for housing completions:

  • Dwelling permits fell by 14.2% y-o-y to 3,511 units
  • Dwelling starts dropped by 15.4% y-o-y to 3,681 units
  • Completions increased by 12.3% y-o-y to 4,578 units
  • Dwellings under construction fell slightly by 0.6% y-o-y to 79,685 units

Slovak Republic Residential Construction graph

Mortgage interest rates rising sharply, following ECB rate hikes

The average interest rate on new housing loans in Slovak Republic is now rising rapidly, following the ECB’s successive key interest rate hikes in recent months.

For new business, in June 2023:

  • Average floating rate loan interest rate (or loans with interest rate fixation (IRF) of up to 1 year): 3.93% in June 2023, sharply up from 1.52% a year ago and 1.01% two years earlier, according to the NBS.
  • IRF over 1 to 5 years: 3.93%, up from 1.76% in the previous year and 0.97% two years ago
  • IRF over 5 to 10 years: 3.80%, higher than 2.07% in June 2022 and 1.10% in June 2021
  • IRF of over 10 years: 4.43%, up from 2.32% in the previous year and 1.23% two years earlier

 For outstanding loans, the average interest rate rose to 1.7% in June 2023, up from 1.29% in June 2022 and 1.41% in June 2021.

  • Maturity of up to 1 year: 4.55, slightly up from 4.05% in the previous year and 4.12% two years earlier
  • Maturity of 1-5 years: 2.82%, up from 2.69% a year earlier and 2.66% two years ago
  • Maturity of over 5 years: 1.68%, up from 1.28% in June 2022 and 1.39% two years ago

 The sharp increase in interest rates in recent months was influenced by the European Central Bank’s (ECB) successive key rate rates since July 2022, raising its repo rate by a cumulative 400 basis points from 0% to 4% in July 2023, in an effort to rein in inflationary pressures.

Slovak Republic ECB Repo Rate and Interest Rates on New Housing Loans graph

Mortgage market slowing

The mortgage market is now slowing, amidst rapidly rising interest rates. In July 2023, the total outstanding amount of housing loans to households in Slovak Republic fell by 4.5% to €38.55 billion (US$41.92 billion) from the same period last year, according to the NBS. 

Housing loans have been increasing continuously by an annual average of 12% from 2009 to 2022, from nearly 31% growth annually from 2005 to 2008.

As a result, the size of the mortgage market grew rapidly in the past two decades, expanding to 38.6% of GDP in 2022, from 32.8% of GDP in 2019, 15.8% of GDP in 2010, and just 6.3% of GDP in 2004.

Slovak Republic Housing Loans Outstanding graph

The rental market is very limited

Bratislava appears to be an attractive location to own properties but anecdotally, properties can be quite hard to let. Bratislava is a small place, and few people absolutely need to live in the center of town unlike the larger capitals of other countries where commuting times can be inconveniently high. Because Slovakia itself is small, the number of expatriates, embassies, and international companies in Bratislava is small, which again restricts the supply of tenants.

Owner-occupancy in Slovakia has risen sharply from about 50% during the 1980s to about 93% in 2022, making Slovakia one of the countries with the highest homeownership rate in the EU, way past the EU average of around 69.1% in 2022, based on figures from the Eurostat. Tenants were only less than 10% of Slovakia’s population.

But only 0.1% of Slovakia’s housing stock is let out by private landlords, mainly in Bratislava.

The growth of owner-occupation is partly due to the contractual savings system (Bauspar) that makes it easy for Slovaks to obtain housing loans. This Bauspar system allows borrowers to take loans at lower interest rates, with the government paying an interest premium on the amount saved.

In 2005, the government decreed the abolition of rent control, effective July 1, 2007. However, the decree was never implemented. Rent deregulation has been postponed repeatedly, as Parliament refuses to deal with this highly sensitive issue.

Slovak Republic Owner Occupancy Rates graph

Gross rental yields are moderate in Bratislava

According to research conducted by the Global Property Guide in November 2022, the gross rental yields for two-bedroom apartments in Old Town, Bratislava’s historic center, averaged 3.3%.

In Bratislava’s less upscale districts of Ruzinov, Nove Mesto, and Petržalka (Bratislava II, III, and V), gross rental yields were not much different, between 3.07% to 3.98%. The Airbnb market is thriving, but expect damage to your property.

In other major cities:

  • In Košice, the country’s second-largest city, rental yields range from 4.52% to 5.85%, with a city average of 5.17%
  • In Banská Bystrica, one of Slovakia’s oldest cities, gross rental yields range from 4.09% to 5.03%, with a city average of 4.56%
  • In Nitra, the country’s fifth largest city, yields are a bit higher, ranging between 5.13% and 6.32%, with a city average of 5.64%
  • In Žilina, the country’s fourth largest city, rental yields range from 3.2% to 4.55%, with a city average of 4.15%

Round-trip transaction costs are very low on residential property in Slovakia.

Economic growth slowing again, and inflation remains high

Slovakia is one of Eastern Europe’s most successful transition countries. 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 of reform under the center-right coalition led by Mikulas Dzurinda (1998-2004) whose reforms won praise from international organizations, and who oversaw EU and NATO entry.

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.

Slovak Republic GDP Growth and Inflation graph

Real GDP growth reached an impressive 10.8% in 2007, following 8.5% growth in 2006. Kia, Volkswagen, and Peugeot Citroen all have built large car plants in Slovakia. In 2008 there was 5.6% growth.

With the Global Financial Crisis, the country experienced a 5.5% economic contraction in 2009. Slovakia’s economy recovered quickly with a GDP growth of 6.7% in 2010, but this was followed by 4 weak years, with 2.7% GDP growth in 2011, 1.3% in 2012, 0.6% in 2013, and 2.7% in 2014.

In the following five years, the economy bounced back, recording a 5.2% expansion in 2015, 1.9% in 2016, 2.9% in 2017, 4% in 2018 and 2.5% in 2019. After contracting by 4.4% in 2020 due to the Covid-19 pandemic, the economy recovered quickly with a 3% growth in 2021.

During 2022, economic growth was relatively subdued, as strong private consumption was offset by poor exports and government spending. Real GDP growth was recorded at only 1.7% last year.

Slovakia’s economy is expected to remain weak this year, with a projected growth of another 1.7%, according to the European Commission. The International Monetary Fund (IMF) is even more pessimistic, with economic growth forecast for the country at just 1.3% in 2023.

In July 2023, nationwide inflation slowed for the fifth month to 9.7%, down from 10.8% in the previous month and its lowest reading since February 2022, amidst a slowdown in commodity price increases, based on figures from the National Bank of Slovakia. Overall inflation abruptly surged to 12.1% in 2022, from an annual average of only 1.8% from 2011 to 2021.

Slovakia’s budget deficit eased to 2.1% of GDP in 2022, sharply down from shortfalls of 6.2% of GDP in 2021, and 5.5% in 2020. However, it remains above the pre-pandemic deficit levels of just 1.3% in 2019 and 1% in 2018. As a result, Slovakia’s gross public debt has fallen to 57.8% of GDP in 2022, down from 63.1% in 2021 and 59.7% in 2020.

The budget deficit is projected to surge again to 6.1% of GDP this year and public debt to about 58.3% of GDP, mainly due to the introduction of new measures to control high energy prices.

“Since the energy prices were mostly fixed in 2022, convergence with the market prices is set to push the inflation to 10.9% in 2023 and 5.7% in 2024. Core inflation remains strong, fuelled by rising prices of food and services. New measures, including those aimed at mitigating high energy prices, are projected to lead to an increase in the public deficit to 6.1% of GDP in 2023,” said the European Commission.

The labor market remains fundamentally strong. In Q1 2023, overall unemployment stood at 6.2%, up from 6% in the previous quarter but down from 6.4% a year earlier.

Slovak Republic Unemployment Rate graph

Slovak Republic’s political woes continue

In 2006 Roberto Fico became Prime Minister (prime minister from 2006-2010, and from 2012 to March 2018), swept in on a victory for the populist Smer-SD party after loudly criticizing the previous right-wing government’s economic, tax, social, pension, and legislative reforms. These had been seen as very positive and successful by such international bodies as the IMF, the World Bank, and the OECD. However, they negatively affected large segments of the population, particularly low-wage earners, the unemployed, and welfare and other social assistance recipients.

While in opposition and during the election campaign, Fico vowed to reverse the majority of these reforms, but on taking office he adopted a more cautious approach, and Slovakia successfully fulfilled the Maastricht criteria required for Euro currency adoption on 1 January 2009.

Fico’s populism found expression in virulent campaigns insulting opponents and press critics, denouncing them as anti-Slovaks. They in turn produced many revelations of his corruption, including the unexplained wealth of his secretary, and apparent mistress, Halászová. Fico’s stewardship was marked by tension with Hungary, and by populist aggression towards Slovakia’s Roman population and Muslim refugees.

Following the murder of investigative journalist Ján Kuciak, who wrote stories about tax frauds and the connections of the Italian mafia ‘Ndrangheta to Fico’s assistant Mária Trošková, Fico resigned the premiership in March 2018. But though Smer-SD replaced Fico as PM with former Deputy Prime Minister Peter Pellegrini, Fico remained the power behind the throne.

During the March 2019 presidential election, socially liberal and pro-EU opposition candidate Zuzana Caputova beat the government’s Maros Sevcovic, with 58% of the vote. Caputova officially assumed office in June 2019.

Then during the February 2020 parliamentary elections, Smer-SD’s Peter Pellegrini lost to the anti-corruption Ordinary People (OLaNO) party led by Igor Matovic, who formed a centre-right coalition the following month. It was the first time Smer-SD had not finished as the largest party since the 2006 elections, mainly due to the continuing public anger over the killing of Kuciak.

However, after just more than a year in office, Matovic resigned in April 2021 following heavy criticism of his decision to purchase Russia’s Sputnik V vaccine and of his handling of the COVID-19 pandemic in general.

Finance Minister Eduard Heger took over as head of government, in an attempt to save the four-party coalition government. Heger had been acting in a caretaker role since losing his majority in September 2022. He then resigned after four members of his caretaker administration left their posts.

Ludovit Odor, an economist and former deputy governor of the central bank, became the interim prime minister in May 2023 ahead of the September 2023 parliamentary elections, amidst the ongoing political crisis in the country, which is struggling with soaring inflation and high energy costs.

The opposition Smer party, led by former populist Prime Minister Fico is currently ahead in the opinion polls.

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