Slovak Republic’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.

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.

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

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.

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.