Slovak Republic Real Estate Market Analysis 2022
Lalaine C. Delmendo | August 28, 2022
During the latest quarter, property prices increased 6.4% (1.9% in real terms).
Slovakia's house prices are now more than 72% above their Q2 2008 peak, mainly due to the surprising surge in house prices during the past two years despite the Covid-19 pandemic. When adjusted for inflation, prices are finally up by almost 24% from their pre-global crisis levels.
In Bratislava region, which has the country's most expensive housing, residential property prices rose by 22.7% y-o-y to €3,403 (US$3,391) per sq. m. in Q2 2022, after rising by 22% in Q2 2021 and 9.7% in Q2 2020.
All other regions also saw robust house price increases during the year to Q2 2022.
- Presov experienced the biggest rise of about 38.8% y-o-y to €2,038 (US$2,031) per sq. m., following a 27.3% increase in Q2 2021.
- In Trnava, house prices rose by 32% y-o-y to €1,865 (US$1,859) per sq. m., an acceleration from a rise of 17% a year earlier.
- In Nitra, house prices rose by 23.9% y-o-y to €1,409 (US$1,404) per sq. m., following a 20.3% growth in the previous year.
- In Trencin, house prices increased 26.1% y-o-y to €1,619 (US$1,613) per sq. m., following a 23.7% increase in Q2 2021.
- In Zilina, house prices rose by 26.7% y-o-y to €2,063 (US$2,056) per sq. m., after rising by 22.4% in Q2 2021.
- In Banska Bystrica, house prices increased 35.2% y-o-y to €1,806 (US$1,800) per sq. m. in Q2 2022, following a 46.7% surge in the previous year.
- In Kosice, house prices rose strongly by 33.7% y-o-y to €2,348 (US$2,340) per sq. m., following a 30% growth in Q2 2021.
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 have been rising strongly since.
Slovakia's house prices are expected to continue rising during the remainder of the year, as property demand, both from local and from foreign investors, remains fundamentally strong. There are no legal restrictions on foreigners buying buildings in Slovakia.
After contracting by 4.4% in 2020 due to the Covid-19 pandemic, the economy recovered quickly with a 3% growth in 2021. However, the economy is projected to slow again this year, amidst the resurgence of Covid-19 infections and supply chain disruptions, and aggravated further by Russia's invasion of Ukraine. The International Monetary Fund (IMF) expects Slovakia's 2022 real GDP growth to slow to 2.2%. The European Commission is more pessimistic, projecting a growth of 1.9% this year.
Rental returns are moderate in Bratislava, Slovakia
How much will you earn? Gross rental yields on apartments are moderate in Bratislava, at around 4.5% to 5.4%. To define terms, the gross rental yield is the rent the landlord will earn - before taxation, vacancy costs, and other costs - compared to the purchase price of the property.
The gross rental yield in the Old Town is about 4.5 to 4.5 %, with smaller apartments earning more. Returns are not much different in Ruzinov and in the New Town. The Airbnb market is thriving, but expect damage to your property.
How much do apartments cost? Apartments in the Old Town of Bratislava cost around EUR 2,600 to EUR 3,400 per square metre (sq.m.). In the nearby areas of Nove Mesto, apartments tend to be cheaper, selling for around EUR 2,400 per sq. m. You can ´get into the market´ for EUR 120,000 to EUR 350,000.
How easily will you rent your property? Anecdotally, properties can be quite hard to let. Bratislava is a small place. Few people absolutely need to live in the centre of Bratislava (unlike in other larger cities). The number of expatriates, embassies, and international companies in Bratislava is small, which again restricts the supply of tenants.
Round trip transaction costs are very low on residential property in Slovakia. See our Slovak Republic property transaction costs analysis and our Slovakia transaction costs compared to other locations.
Rental income tax is moderate in Slovak Republic
Rental Income: Rental incomeis taxed at a flat rate of 19% for income up to €36,256.38, and at a flat rate of 25% on income exceeding €36,256.38.
Capital Gains: Capital gains realized from the sale of real estate are taxed at 19% to 25%.
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: Income and capital gains are taxed at a flat rate of 19% for income up to €36,256.38, and at a flat rate of 25% on income exceeding €36,256.38.
Roundtrip buying costs are very low in Slovakia
Total roundtrip buy-sell costs are very low, between 4% and 7.60% of property value. The buyer pays for the notary and registration fees, and legal fees. The seller pays for the real estate agent’s fees.
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.
Economic growth slowing, inflation surgingSlovakia 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’ 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.
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 10.8% 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, there was a 5.4% GDP contraction in 2009. Slovakia’s economy recovered quickly with GDP growth of 5% in 2010, but this was followed by 4 weak years, with 2.8% GDP growth in 2011, 1.7% in 2012, 1.5% in 2013 and 2.8% in 2014.
In the following five years, the economy bounced back, recording a 4.8% expansion in 2015, 2.1% in 2016, 3% in 2017, 3.8% in 2018 and 2.6% 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.
Economic growth is projected to slow again this year, amidst the resurgence of Covid-19 infections and supply chain disruptions, which were aggravated further by Russia’s invasion of Ukraine. The International Monetary Fund (IMF) expects Slovakia’s 2022 real GDP growth to slow to 2.2%. The European Commission is more pessimistic, projecting a growth of 1.9% this year.
“Growth rebounded to 3.0 percent in 2021, but a stronger recovery was impeded by resurgent infection waves and supply chain disruptions,” said the IMF in its June 2022 Article IV consultation with Slovak Republic. “The war in Ukraine will dampen the recovery given Slovakia’s geographical proximity, heavy reliance on energy imports from Russia, and high integration into global value chains,” IMF added.
Consumer prices are rising sharply. In July 2022, nationwide inflation surged to 13.6%, sharply up from just 3.3% in the same period last year, amidst surging energy and commodity prices, according to the National Bank of Slovakia. It was the highest level since June 2000. Overall inflation is expected to rise sharply to 10.5% this year, from an annual average of only 1.8% from 2011 to 2021, based on IMF figures.
Slovakia’s budget deficit was equivalent to 6.2% of GDP in 2021, up from shortfalls of 5.5% in 2020, 1.3% in 2019 and 1% in 2018. It was the biggest deficit since 2010. As a result, Slovakia’s gross public debt has risen to 63.1% of GDP in 2021, up from 59.7% in 2020 and 48.1% in 2019. It is projected to fall slightly to 61.5% of GDP this year, based on the projections released by the IMF.
Public finance is projected to improve in the coming years with the recent reforms to the country’s fiscal framework and the pension system.
The labour market remains fundamentally strong. In Q1 2022, overall unemployment dropped to 6.4%, from 6.6% in the previous quarter and 7.1% a year earlier.