Slovakia's Residential Real Estate Market Analysis 2024

Slovak Republic's residential property prices continue to fall, albeit at a much slower pace, amidst recovering demand and the continued decline in residential construction activity. Before the housing slump last year (2023), the country experienced an eight-year house price boom from 2015 to 2022.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

The nationwide average residential property price fell by 1.28% to €2,462 (US$2,729) per square meter (sqm) during the year to Q2 2024, based on figures from the National Bank of Slovakia (NBS). It was an improvement from y-o-y price declines of 5.2% in Q1 2024, 8.57% in Q4 2023, 10.17% in Q3 2023, and 6.63% in Q2 2023.

When adjusted for inflation, property prices actually dropped 3.31% y-o-y in Q2 2024.

Yet during the latest quarter, nationwide property prices actually increased 1.61% (0.96% in real terms) q-o-q, the first quarterly increase after falling in the preceding six consecutive quarters.

Slovakia's house price annual change

In Bratislava region, which has the country's most expensive housing, residential property prices were down slightly by 0.6% y-o-y to €3,127 (US$3,466) per sqm in Q2 2024, the sixth consecutive quarter of y-o-y fall but the lowest decline in a row. Quarter-on-quarter, prices in the region dropped 1.3% in Q2 2024.

All other regions also registered falling house prices during the year to Q2 2024.

• In Trnava, house prices fell slightly by 0.86% to €1,837 (US$2,036) per sqm in Q2 2024 from a year earlier, following a y-o-y decline of 3.96% in the previous quarter and its fifth straight quarter of y-o-y price falls.
• In Nitra, house prices dropped 2.72% to €1,393 (US$1,544) per sqm in Q2 2024, following a y-o-y fall of 2.09% in Q1 2024 and its fourth consecutive quarter of y-o-y price decline.
• In Trencin, house prices fell slightly by 0.06% to €1,569 (US$1,739) per sqm in Q2 2024 from the previous year, an improvement from y-o-y price declines of 6.35% in Q1 2024, 7.07% in Q4 2023, 9.25% in Q3 2023, and 3.03% in Q2 2023.
• In Zilina, house prices dropped by another 5.99% to €1,819 (US$2,016) per sqm in Q2 2024 from a year earlier, following y-o-y falls of 10.22% in Q1 2024, 9.03% in Q4 2023, 11.39% in Q3 2023, and 6.2% in Q2 2023.
• Banska Bystrica experienced the biggest decline in house prices of about 7.41% y-o-y to an average of €1,562 (US$1,731) per sqm, its fifth consecutive quarter of y-o-y fall.
• In Kosice, house prices were down slightly by 0.43% to €2,087 (US$2,313) per sqm in Q2 2024 from the same period last year, its sixth straight quarter of y-o-y price fall and the lowest in a row.
• In Presov, house prices fell by 3.66% y-o-y to €1,818 (US$2,015) per sqm in Q2 2024, a deceleration from annual declines of 12.35% in Q1 2024, 16.62% in Q4 2023, 18.04% in Q3 2023 and 7.41% in Q2 2023.

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.

During 2023, house prices fell by nearly 9% (-14% in real terms), amidst weak property demand and a slowing economy.

"The real estate market in Slovakia, like other areas, was influenced by several factors last year. This time, too, it was influenced not only by the war in Ukraine but also by the related high energy prices, inflation, and a significant increase in interest rates," said real estate consultancy firm CBRE.

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

In the past two years, economic growth in Slovakia was relatively subdued, as strong private consumption was offset by poor exports and government spending. Real GDP growth was recorded at only 1.8% in 2022 and 1.6% in 2023.

Slovakia's economy is expected to gradually improve in the coming years, with a projected growth of 2.2% this year and 2.9% in 2025, based on projections released by the European Commission. The International Monetary Fund's forecast is a bit more conservative, projecting a real GDP growth rate of 2.1% this year and 2.6% next year.

Demand Highlights

Apartment prices stabilizing

Apartments registered a slight annual price increase of 0.73% in Q2 2024 to an average of €2,750 (US$3,048) per sqm, following y-o-y price falls of 3.83% in Q1 2024, 7.54% in Q4 2023, 9.36% in Q3 2023, and 7.36% in Q2 2023, based on figures from the NBS.

• 1-room: prices fell slightly by 0.8% to €3,081 (US$3,415) per sqm during the year to Q2 2024, an improvement from a y-o-y decline of 6.1% in the same period last year.
• 2-room: prices were up by 1.8% to €2,904 (US$3,218) per sqm during the year to Q2 2024, in contrast to an annual fall of 7.9% in Q2 2023.
• 3-room: prices fell slightly by 0.4% y-o-y to €2,516 (US$2,788) per sqm in Q2 2024, an improvement from an annual decline of 8% in Q2 2023.
• 4-room: prices increased by 5.4% y-o-y to €2,667 (US$2,956) per sqm in Q2 2024, in contrast to a price fall of 7.5% in the previous year.
• 5+-room: prices increased slightly by 0.9% y-o-y to €2,654 (US$2,941) per sqm in Q2 2024, after registering an annual price fall of 11.1% in Q2 2023.

Houses also declined in value by a slight 0.82% to €1,931 (US$2,140) per sqm during the year to Q2 2024, lower than the y-o-y price falls 3.42% in Q1 2024, 3.19% in Q4 2023, 6.23% in Q3 2023 and 2.01% in Q2 2023.

Supply Highlights

Residential construction activity slows further

In 2023, the total number of housing permits issued fell by 3.9% y-o-y to 18,449 units, following a huge decline of 16.2% in the prior year, according to the Statistical Office of the Slovak Republic. Similarly, housing starts were down by 5% y-o-y to 19,573 units last year, after falling by 15.9% in 2022.

In contrast, housing completions increased by a modest 3.3% to 20,891 units in 2023 from a year earlier, following declines of 2.1% in 2022 and 3.9% in 2021.

The weakness of the residential construction sector continues this year. In the first half of 2024:

• Dwelling permits fell rapidly by 16.3% y-o-y to 7,923 units.
• Dwelling starts dropped by 14.3% y-o-y to 8,469 units.
• Completions fell by 13.4% y-o-y to 8,481 units.
• Dwellings under construction fell slightly by 1.4% y-o-y to 79,518 units.

Rental Market

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 93.6% in 2023, making Slovakia one of the countries with the highest homeownership rate in the EU, way past the EU average of around 69.2% last year, 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.

Gross rental yields are moderate

Nationwide, the average gross rental yield stood at 5.29% in Q2 2024, at par with the previous year, according to research conducted by the Global Property Guide.

In Old Town, Bratislava's historic center, the gross rental yields for two-bedroom apartments averaged 4.17% in Q2 2024.

In Bratislava's less upscale districts of Ruzinov, Nove Mesto, and Petržalka (Bratislava II, III, and V), gross rental yields for two-bedroom apartments were not much different, between 4.41% to 4.67% in Q2 2024. 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 are higher, ranging from 5.66% to 5.96%, with a city average of 5.84%.
• In Banská Bystrica, one of Slovakia's oldest cities, gross rental yields range from 5.36% to 5.63%, with a city average of 5.49%.
• In Nitra, the country's fifth largest city, yields are a bit higher, ranging between 5.46% and 7.03%, with a city average of 6.1%.
• In Žilina, the country's fourth largest city, rental yields range from 4.4% to 5.23%, with a city average of 4.94%.

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

Mortgage Market

Mortgage interest rates remain high

Mortgage interest rates in the Slovak Republic remain extraordinarily high, following the ECB's successive key interest rate hikes in the past two years.

For new housing loans, the average interest rate reached 4.19% in July 2024, up from 3.91% in July 2023 and 2.15% in July 2022.

For new business, in July 2024:

• Average floating rate loan interest rate or loans with interest rate fixation (IRF) of up to 1 year: 4.82% in July 2024, up from 4.04% a year ago and 1.82% two years earlier, according to the NBS
• IRF over 1 to 5 years: 4.19%, up from 3.93% in the previous year and 2.08% two years ago
• IRF over 5 to 10 years: 3.48%, slightly lower than the 3.73% in July 2023 but still far higher than the 2.51% two years ago
• IRF of over 10 years: 4.99%, sharply up from 3.52% in the previous year and 2.76% two years earlier

For outstanding loans, the average interest rate rose to 2.44% in July 2024, up from 1.74% in July 2023 and 1.31% in July 2022.

• Maturity of up to 1 year: 4.24% in July 2024, slightly down from 4.54% in the previous year but still up from 4.04% two years earlier
• Maturity of 1-5 years: 2.86%, slightly up from 2.83% in the previous year and 2.71% two years ago
• Maturity of over 5 years: 2.44%, up from 1.73% in July 2023 and 1.3% two years earlier

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 450 basis points from 0% to 4.50% in September 2023, in an effort to rein in inflationary pressures. As inflation eased, the ECB reversed its monetary policy and cut its repo rate by 25 basis points to 4.25% in June 2024.