Slovenia

Slovenia Residential Real Estate Market Analysis 2023

Lalaine C. Delmendo

House prices in Slovenia continue to rise strongly, amidst stable demand and residential construction activity. The nationwide house price index was up by a huge 15.65% during the year to Q2 2022, following y-o-y increases of 16.92% in Q1 2022, 15.77% in Q4 2021, 12.9% in Q3 2021 and 10.07% in Q2 2021, according to the Statistical Office of the Republic of Slovenia. When adjusted for inflation, house prices increased by a more modest 6.58% in Q2 2022.

Slovenia’s house price annual change

On a quarterly basis, nationwide house prices rose by 3.47% in Q2 2022 but actually declined by 1.09% in real terms.

In Q2 2022:

  • In Ljubljana, Slovenia’s capital, the price index for existing flats soared by 15.91% y-o-y (6.82% inflation-adjusted). On a quarterly basis, house prices were up by 2.61% (-1.91% inflation-adjusted).
  • In the rest of Slovenia, the prices of existing flats surged by 18.05% (8.79% inflation-adjusted) during the year to Q2 2022. On a quarterly basis, the price index rose by 2.72% (-1.8% inflation-adjusted) in Q3 2019.

After booming in the early-2000s, Slovenia’s property market weakened in 2008 due to the global economic crisis. The following years were difficult. House prices fell every year till 2014, at least in inflation-adjusted terms.

House prices started to recover in 2015 and had been on a rising trend since then, even despite the Covid-19 pandemic in recent years.

ANNUAL HOUSE PRICE CHANGE IN SLOVENIA (2008-2021)
Year Nominal Inflation-adjusted
2008 -0.16 -3.40
2009 -8.12 -9.14
2010 -0.15 -1.80
2011 1.37 -1.07
2012 -8.83 -11.12
2013 -4.38 -5.42
2014 -4.39 -4.30
2015 0.05 0.64
2016 6.89 6.27
2017 9.87 8.44
2018 8.27 6.28
2019 4.83 3.23
2020 5.17 5.92
2021 15.77 11.14
Sources: Statistical Office of the Republic of Slovenia, Global Property Guide

Demand remains stable. In the first half of 2022, the total number of dwelling transactions was almost unchanged from a year earlier, to 6,791 units, according to the Statistical Office of the Republic of Slovenia. In terms of transaction value, dwelling sales reached €884.09 million (US$940.08 million) in H1 2022, up by 7.4% from the same period last year.

Foreigners have been able to buy property since February 2003, on a reciprocal basis. Reciprocity is a principle verified by the Ministry of Justice (MoJ) based on the Law on Reciprocity (Official Gazette No 9/99). Then following accession to the EU in 2004, EU citizens may now buy properties in Slovenia without restrictions.

Despite rising interest rates, total lending for house purchases increased by 11.6% to €8.15 billion (US$8.6 billion) in Q3 2022 from the previous year, based on the figures from the Bank of Slovenia.

Residential construction activity continues to rise modestly. In the first ten months of 2022, the number of dwellings for which permits were issued increased by 2.8% to 3,655 units as compared to the same period last year. Over the same period, the total useful floor area of dwellings was almost unchanged at 492,963 sq. m.

Slovenia house price flats location annual change

The overall economy is slowing, though. In the third quarter of 2022, Slovenia’s economy grew by 3.4% from a year earlier, a sharp slowdown from the previous quarter’s 8.3% y-o-y expansion and the lowest growth seen since Q1 2021, according to the country’s statistics office. Despite this, the European Commission expects the Slovenian economy to expand by a robust 6.2% this year, before slowing to just 0.8% in 2023.

Stronger price hikes on old properties

Existing dwellings are currently rising in value faster than newly-built dwellings, in annual terms. In Q2 2022, the existing dwellings price index rose by 16.33% (7.21% inflation-adjusted) from a year ago. Quarter-on-quarter, prices were also up by 2.92% (-1.61% inflation-adjusted) during the latest quarter.

  • The existing flats price index increased by a huge 17.25% y-o-y (8.06% inflation-adjusted) and was up by 2.68% (-1.84% inflation-adjusted) during the latest quarter.
  • The existing family houses price index was up by 14.74% y-o-y (5.74% inflation-adjusted) and rose by 3.34% (-1.21% inflation-adjusted) during the latest quarter.

Slovenia house price indices type

The values of newly-built dwellings are also rising, albeit at a slower pace, increasing by 8.45% y-o-y in Q2 2022 (but declined slightly by 0.1% inflation-adjusted). On a quarterly basis, newly built dwellings rose by 9.51% (4.68% inflation-adjusted) in Q2 2022.

  • The newly-built flats price index rose by 13.24% (4.36% inflation-adjusted) during the year to Q2 2022. The index increased 11.78% (6.86% inflation-adjusted) from the previous quarter.
  • The newly-built family houses price index fell by 2.46% y-o-y (-10.11% inflation-adjusted) in Q2 2022. On a quarterly basis, the index barely changed but declined by 4.39% when adjusted for inflation.

Demand remains more or less steady

In the first half of 2022, the total number of dwelling transactions was almost unchanged from a year earlier, to 6,791 units, following an annual growth of 19.9% in 2021 and a decline of 17.5% in 2020, according to the Statistical Office of the Republic of Slovenia.

Slovenia transaction nwely built dwellings

By property type, in H1 2022:

  • Existing dwelling transactions rose by 5.3% y-o-y to 6,680 units in H1 2022. Transactions of existing flats, which accounted for nearly 60% of total dwelling transactions, were up by 1.3% in H1 2022 from a year earlier. Existing family house transactions increased by 11.6%.
  • Newly-built dwelling transactions, which account for less than 2% of total transactions, fell by a huge 77.4% y-o-y in H1 2022. Transactions of newly built flats and family houses plunged by 81.1% and 68.3%, respectively, over the same period.

Slovenia transaction existing dwellings

In terms of transaction value, dwelling sales reached €884.09 million (US$940.08 million) in H1 2022, up by 7.4% from the same period last year. Existing dwellings sales, which accounted for almost 97% of the total value of transactions, surged 19.3% while newly-built dwellings sales dropped 74%.

Residential construction activity improving

During 2021, the total number of dwellings in residential buildings with approved permits rose by 17% to 4,289 units from a year earlier, according to the Statistical Office of the Republic of Slovenia. Likewise, the useful floor area of dwellings also increased by 17.7% y-o-y to 590,581 sq. m. last year.

Of Slovenia’s twelve statistical regions, ten saw year-on-year increases in the number of dwellings for which permits were issued.

Koroška registered the biggest y-o-y increase of 59.6% in 2021, followed by Osrednjeslovenska (33.4%), Pomurska (26.6%), Gorenjska (24.6%), Obalno-kraška (24.5%), and Goriška (23.9%).

Slovenia dwelling permits

More moderate growth in construction activity was seen in Zasavska (8.9%), Savinjska (8.7%), Podravska (4.6%), and Jugovzhodna Slovenija (2.1%).

In contrast, Posavska and Primorsko-notranjska recorded a y-o-y decline in dwelling permits of 47.5% and 15.2%, respectively.

The recovery continued this year, albeit at a much slower pace. In the first ten months of 2022, the number of dwellings for which permits were issued increased by 2.8% to 3,655 units as compared to the same period last year. On the other hand, the total useful floor area of dwellings was almost unchanged to 492,963 sq. m. from 492,930 sq. m. a year ago.

Mortgage interest rates are now rising

Following the European Central Bank’s move to raise its key interest rates to rein in inflationary pressures in the European Union, mortgage interest rates in Slovenia have been rising rapidly in recent months. Recently, the ECB raised the interest rate on the main refinancing operations by another 75 basis points to 2%, effective November 2, 2022 - the third consecutive rate hike in four months.

Slovenia insterest rates housing

As a result, mortgage interest rates in Slovenia are now rising rapidly, too. In October 2022:

  • Floating and initial rate fixation (IRF) of up to 1 year: 3.18%, sharply up from 1.53% in October 2021
  • IRF over 1 and up to 5 years: 3.01%, up from 1.82% in the previous year
  • IRF over 5 years and up to 10 years: 2.96%, sharply up from 1.63% in October 2021
  • IRF over 10 years: 3.08%, up from 1.74% in October 2021

The mortgage market continues to grow, but remains underdeveloped

Slovenia’s mortgage market has expanded from 7.6% of GDP in 2007 to about 14.3% of GDP in 2021. It has been held back by structural problems - the underdeveloped land registration system, weak foreclosure procedures, and other problems of the legal environment.

slovenia housing loans

During 2021, the total amount of outstanding housing loans rose by 9%, an acceleration from an annual average of 3.6% from 2011 to 2020, but still down from an average expansion of 22% from 2008 to 2010.

Despite rising interest rates, total lending for house purchases increased by 11.6% to €8.15 billion (US$8.6 billion) in Q3 2022 from the previous year, based on the figures from the Bank of Slovenia.

  • Loans for house purchases denominated in domestic currency rose strongly by 12.5% y-o-y to €7.94 billion (US$8.38 billion) in Q3 2022.
  • Loans for house purchases denominated in foreign currency, on the other hand, plunged by 12.9% y-o-y to €210 million (US$222 million) over the same period.

Slovenia housing loans mil euro

Slovenia’s banking sector is dominated by state-owned banks which control more than 40% of the market, while France’s Societe Generale, Italy’s Unicredit, and a number of Austrian banks are also present in the market.

Moderate rental yields

Gross rental yields on apartments are moderate in Ljubljana, at 3.49% to 7.18% in the city center, and higher outside, according to research conducted by the Global Property Guide in November 2022. 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.

Two-bedroom apartments in Ljubljana city center cost on average, €274,500. In the nearby areas, apartments tend to be cheaper, selling for around €239,000 for a two-bedroom apartment.

In Ljubljana’s city center, a studio-type apartment can be rented at around €580 (US$612) per month, while the two-bedroom apartment has an average monthly rent of about €800 (US$844). Bigger apartments with at least four bedrooms are rented out for about €2,000 (US$2,109).

Round-trip transaction costs are low in Slovenia. See our Property transaction costs analysis in Slovenia and Round-trip property transaction costs in Slovenia, compared to the rest of Europe.

Economic growth slows

In the third quarter of 2022, Slovenia’s economy grew by 3.4% from a year earlier, a sharp slowdown from the previous quarter’s 8.3% y-o-y expansion and the lowest growth seen since Q1 2021, according to the country’s statistics office.

slovenia GDP inflation

The European Commission expects the Slovenian economy to expand by a robust 6.2% this year, before slowing to just 0.8% in 2023. On the other hand, the International Monetary Fund (IMF) projects a more conservative 2022 growth forecast for Slovenia of 5.4%.

“Slovenia’s economic outlook has become more challenging,” said the IMF. “Uncertainty is also unusually high and risks are predominantly on the downside. The key risks stem from the war in Ukraine and include further commodity price increases, lower external demand, and supply chain disruptions. Inflation could also remain high for longer, possibly triggering higher wages and higher inflation expectations, which would in turn require a tighter policy stance.”

“Other risks include a possible correction in real estate prices, which are seen as overvalued,” added the IMF.

Annual inflation stood at 10% in November 2022, sharply up from just 4.6% in the same period last year and one of the highest levels seen in the past 26 years, according to the Statistical Office of the Republic of Slovenia. The surge in inflation was mainly driven by the continued increase in commodity prices, as well as in fuel and energy prices.

Inflation in Slovenia averaged just 1.1% from 2011 to 2021, based on IMF figures.

Yet the labor market continues to strengthen. In Q3 2022, unemployment stood at 4%, down from 4.2% in Q2 and 4.3% in Q1. The country’s jobless rate surged to 5.6% in Q1 2021, primarily due to the adverse effects of the Covid-19 pandemic.

There were about 42,000 unemployed people in Slovenia in Q3 2022, down from 44,000 unemployed in the previous quarter and 47,000 unemployed a year earlier.

During the April 2022 parliamentary elections, Robert Golob won a surprise victory over veteran right-wing populist Prime Minister Janez Jansa. Golob will lead a three-way center-left coalition between his green Freedom Movement and the Social Democrats and the Left. Golob pledged to reform politics in the country and focus on addressing problems in healthcare and containing rising energy and food prices.

Recently, Natasa Pirc Musar became Slovenia’s first female president by winning 54% of the votes cast in the second round of the presidential elections held on November 13, 2022. The role of a president is largely ceremonial but holds authority in the country’s foreign affairs and defense.

SOURCES:

Slovenia - More data and information