House prices in Slovakia are recovering
Last Updated: November 30, 2015
Average residential property prices in Slovakia rose by 1.15% to €1,229 (US$ 1,318) per square metre (sq. m.) during the year to Q3 2015. the country's highest y-o-y increase since the housing market depression started in Q1 2009, based on the figures from the National Bank of Slovakia (NBS). When adjusted for inflation, property prices rose by 1.46% over the same period. On a quarterly basis, property prices rose by 0.66% in Q3 2015 (0.96% in real terms).
The housing boom in Slovakia lasted from 2006 to Q2 2008, with house price rises ranging from 14% to 35% per annum. The surge stopped in late 2008, and since then prices have fallen continuously, the latest year excepted. Slovakia’s house prices are now 20.7% below their peak in Q2 2008 (-29.2% in real terms).
Bratislava region, which has the country's highest house prices, spearheaded the price rises with a 3.23% price rise to price rise to €1,695 (US$ 1,818) per sq. m. during the year to Q3 2015 (3.54% in real terms). Other regions with y-o-y price increases in Q3 2015 include: Kosice (3.10%), Trnava (1.09%) and Trencin (0.64%).
Regions with residential property price declines:
- Banska Bystrica experienced the biggest plunge of about 6.37% (-6.08% in real terms) to €706 (US$ 757) per sq. m. during the year to Q3 2015.
- House prices in Nitra fell by 4.47% (-4.18% in real terms) y-o-y to €556 (US$ 596) per sq. m.
- In Zilina, prices dropped by 3.83% (-3.54% in real terms) to €753 (US$ 807) per sq. m. during the same period.
- Presov experienced a small nominal house price decline of 0.13% to €763 (US$ 818) per sq. m., but actually rose by 0.17% when adjusted for inflation, during the year to Q3 2015.
Flats registered house price gains nationally, surging by 5.59% (5.91% in real terms) to €1,361 (US$ 1,459) per sq. m. during the year to Q3 2015. Houses fell in value by 1.55% (-1.25% in real terms) to €1,079 (US$ 1,157) per sq. m. Villa prices also fell by 1.88% (-1.58% in real terms) to €1,776 (US$ 1,904) per sq. m.
Rental yields are moderately good in Bratislava, but beware vacancies
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 centre 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.
Apartments in the Old Town of Bratislava cost on average, EUR 2,200 per square metre (sq.m.). In the nearby areas of Ruzinov and in the New Town, apartments tend to be cheaper, selling for around EUR 1,900 per sq. m.
Rents range from around EUR 9 to EUR 10 per sq. m. per month in the Old Town, whereas in Ruzinov and in the New Town, rents range from EUR 7.4 to EUR 10.75 per sq. m. per month.
The gross rental yield from a 60-sq. m. apartment in the Old Town is moderately good at 5.48%. Bigger apartments in the Old Town return similar rental yields, ranging from 5.32% to 5.73%.
A 40-sq. m. apartment in Ruzinov and in the New Town returns a slightly better rental yield at 6.36%.
Round trip transaction costs are very low on residential property in Slovakia. See our Slovak 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 €35,022.31, and at a flat rate of 25% on income exceeding €35,022.31.
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 €35,022.31, and at a flat rate of 25% on income exceeding€35,022.31.
Roundtrip buying costs are very low in Slovakia
Total roundtrip buy-sell costs are very low, between 3% and 6.60% of property value. The buyer pays for the notary and registration fees, and 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.
Higher economic expansion in 2015-16Slovakia registered 3.6% GDP growth during the year to Q3 2015, its fastest pace of economic expansion in almost five years. Industrial production growth, as well as continuous labour market gains, were the main drivers of Slovakia's growth.
It was the fastest growth recorded among euro zone members during the quarter, followed by Spain (0.8%), Cyprus (0.5%), and Lithuania (0.5%).
The IMF and the National Bank of Slovakia (NBS) predict that the Slovakian economy will expand by 3.2% in 2015. The NBS projects growth of 3.4% in 2016.
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’ 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 10.7% in 2007, following 8.3% for 2006, 6.5% for 2005, and 5.2% for 2004. Kia, Volkswagen, and Peugeot Citroen all have built large car plants in Slovakia.
Since then, Slovakia has had two terms under the socialist and populist leader Robert Fico, of the Smer party (prime minister 2006-2010, and 2012 to present).
Fico’s stewardship has been marked by tension with Hungary, populism towards Slovakia’s Roma population, and weaker economic growth
In 2008 there was 5.4% growth, and then a collapse with the crisis and a 5.3% GDP contraction in 2009. Slovakia’s economy recovered with GDP growth of 4.8% in 2010, but this was followed by 3 weak years, with 2.7% GDP growth in 2011, 1.6% in 2012 and 1.4% in 2013. In 2014, the economy bounced back somehow, recording a 2.4% expansion.
Unemployment was around 11.38% in September 2015, according to the Central Office of Labour, Social Affairs and Family (ÚPSVaR), 1.06% less than last year.
“We are still at six-year low when it comes to the unemployment development, while regarding the number of new jobs we are at a seven-year high,” said Labour Minister Ján Richter, as quoted by the SITA newswire.
Slovakia's improving economy should pave way for new jobs, and lower unemployment in the next few months, says Ľubomír Koršňák, analyst for UniCredit Bank Czech Republic and Slovakia.
In October 2015, Slovak Prime Minister Robert Fico stated that the Slovakian government will file a lawsuit against the European Union's (EU) mandatory immigration quotas on December 18, 2015 at the European Court of Justice (ECJ). Fico even warned that he is ready to propose "a discharge of his country from the European Union" if the EU insisted Slovakia in taking in refugees from the Middle East.
Fico clarified that the lawsuit was due to the way the relocation of around 120,000 migrants (that are currently staying in Italy and Greece) was decided upon, and not against the migrants themselves.
Earlier this year, a lot of refugees and migrants coming from the Middle Eastern and African countries, flocked to Europe and seeking asylum after being displaced due to ongoing conflicts in their home countries. According to Eurostat, about 626,715 asylum applications were received by EU member countries in 2014, and a whooping 816,500 applications were added during the first 9 months of 2015.
Based on the decision of EU's interior ministers on September 22, Slovakia is supposed to accept 802 refugees (612 from Greece and 190 from Italy). But Slovakia has been ignoring the quota and has not yet installed liaison officers who will choose among refugees in Greece.
At the end of October, Slovakia grudgingly stated that it will accept a maximum of 200 refugees.