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.

Slovak Republic's mortgage loan interest rates:

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.

Mortgage market is still weak

The mortgage market is still weak, amidst rapidly rising interest rates. In July 2024, the total outstanding amount of housing loans to households in the Slovak Republic rose by 3.53% to €39.91 billion (US$35.36 billion) from the same period last year, according to the NBS. Yet it remains lower by 4.1% as compared to the peak level seen in December 2022.

Before falling last year, 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 nearly 38% of GDP in 2022, from 32.8% of GDP in the pre-pandemic year of 2019, 15.8% of GDP in 2010, and just 6.3% of GDP in 2004.

However, in 2023, the size of the mortgage market contracted to about 32% of GDP, as outstanding housing loans declined by 6.16% year-on-year.

Socio-Economic Contex

Economic conditions improving gradually, inflation eases

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.

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 3.3% in 2020 due to the Covid-19 pandemic, the economy recovered quickly with a 4.8% growth in 2021.

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

"Real GDP grew by 1.6% in 2023, primarily reflecting the decline in private and public consumption. The weaker economic performance of the country's major trade partners resulted in a decline of exports and some deterioration in Slovakia's market share," said the European Commission.

Slovakia's economy is expected to gradually improve, 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.

In August 2024, nationwide inflation stood at 2.8%, slightly up from 2.6% in the previous month but far lower than the 8.8% recorded in the same period last year, according to 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. In 2023, inflation remained high at 11%.

Slovakia's budget deficit widened again to about 4.9% of GDP in 2023, from 2.1% of GDP in 2022. From just 1% in 2018 and 1.3% in 2019, the deficit level increased to 5.5% of GDP in 2020 and 6.2% of GDP in 2021, mainly due to pandemic-related expenditures.

Despite this, Slovakia's gross public debt has fallen to 56% of GDP in 2023, down from 57.8% in 2022, 63.1% in 2021 and 59.7% in 2020.

The budget deficit is projected to surge further to about 5.9% of GDP this year and public debt to about 58.5% of GDP.

"In 2024, the general government deficit is projected to increase further to 5.9%, driven by expenditure measures adopted in 2023. These include a higher compensation of public employees, a family package including a tax bonus, the introduction of a parental bonus under the pension reform together with a full 13th pension payment, and other expenditure-increasing measures," said the Commission.

The labor market remains fundamentally strong. In Q2 2024, overall unemployment fell to 5.2%, down from 5.6% in the previous quarter and 5.7% a year earlier.

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 was expressed in virulent campaigns that insulted 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. However, 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 worsening political crisis in the country, which was struggling with soaring inflation and high energy costs.

During the September 2023 elections, Fico's Smer-SD party secured the most votes and gained 42 of the 150 seats in the new parliament. Progressive Slovakia (PS) came second with 32 seats. Hlas, led by former PM Pellegrini, was a close third and saw 27 of its candidates elected.

Fico returned to power as prime minister and pledged an immediate end to military support for Ukraine. However in May 2024 while he greeted supporters in the central town of Handlova, Fico was shot four times at a close range and seriously wounded in an assassination attempt. This threatens to worsen the political climate and deepen the polarisation in the country.

Sources:

1. Residential property prices (National Bank of Slovakia): https://nbs.sk/
2. Housing statistics (Eurostat): https://ec.europa.eu/
3. Slovak residential prices stay still after bottoming out (Property Forum): https://www.property-forum.eu/
4. The residential market in Bratislava reviving, and prices are expected to grow (The Slovak Spectator): https://spectator.sme.sk/
5. Gross rental yields in Slovakia: Bratislava and 4 other cities (Global Property Guide): https://www.globalpropertyguide.com/
6. Market Outlook 2024: Slovak real estate continues to attract investors (CBRE): https://www.firemnereality.sk/
7. Economic forecast for Slovakia (European Commission): https://economy-finance.ec.europa.eu/
8. Slovakia Home Ownership Rate (Trading Economics): https://tradingeconomics.com/
9. Home Ownership Rate | Europe/1000 (Trading Economics): https://tradingeconomics.com/
10. Banking interest rates statistics - loans (National Bank of Slovakia): https://nbs.sk/
11. Loans (National Bank of Slovakia): https://nbs.sk/
12. Europe's border-free zone expands (BBC News): http://news.bbc.co.uk/
13. Slovak Republic (International Monetary Fund): https://www.imf.org/
14. Slovakia country profile (BBC News): https://www.bbc.com/
15. Euro convergence criteria (Wikipedia): https://en.wikipedia.org/
16. Pro-Russian politician wins Slovakia's parliamentary election (CNN): https://edition.cnn.com/
17. Slovakia: 2023 general election and formation of a new coalition government (UK Parliament): https://commonslibrary.parliament.uk/