THE GLOBAL financial and economic crisis led to a steep decline in the Slovak market for residential real estate. Prices shrank, many apartments labelled ‘luxury’ languished unsold, and new development projects were postponed or redrafted. Lately the situation has stabilised, and prices even posted an increase during the final quarter of 2012. While some market watchers perceive this growth to have been a statistical error, others see it as evidence of a rebalancing of the real estate market.
Nevertheless, expectations remain somewhat pessimistic, with observers pointing to the growing unemployment rate in Slovakia as well as the decidedly mixed economic outlook for the eurozone.
“Currently, we can perceive the situation as stable, with a moderately decreasing tendency,” Daniela Danihel Rážová, director of real estate agency Bond Reality and head of Slovakia’s Association of Real Estate Brokers, told The Slovak Spectator. She added that some owners are still marketing their properties well above their true market value and will have to lower prices significantly to achieve sales.
Matúš Jančura, senior analyst with Bencont Investments, also regards the situation as stable.
“Demand and supply have been oscillating for a long period of time around a balanced price,” Jančura told The Slovak Spectator. “Our surveys of the Bratislava market with new constructions over the last two years indicate this.”
The average price of residential real estate in Slovakia rose by 0.6 percent on a quarterly basis to €1,247 per square metre in the fourth quarter of 2012, the TASR newswire reported, citing data from the National Bank of Slovakia. Simultaneously, they grew by 0.9 percent when compared with the same period of 2011. This was the first year-on-year increase since the end of 2008. The average annual price during the whole of 2012 was €1,237 per square metre, which represented an annual fall of 1.1 percent. Bratislava Region had the highest prices, with one square metre of residential property costing an average of €1,661. Nitra Region placed at the opposite end of the spectrum, with an average price of €612 per square metre.
Rážová said she regards the reported fourth-quarter increase as a statistical error stemming from comparing ‘apples with oranges’.
“Since statistics are made from offer prices, these may be owners’ unrealistic requirements of prices, which they later decrease for actual clients,” Rážová said.
On the other hand, Bencont Investments had expected a moderate increase in prices even earlier because it saw pressure for this throughout 2012.
“Since the decline of the market, demand has preferred cheaper apartments and thus put pressure on prices,” Jančura said. “They really decreased, and also developers cut their margins in new projects to make apartments cheaper. The situation in 2012 reached a balance between offer and demand.”
In real life this means that as the number of available cheap apartments gradually fell, their share of all apartments sold decreased, causing an increase in prices.
But Jančura warned that sales, even of some hundreds of apartments, can change the statistics. In general, his firm’s monitoring of prices on the Bratislava market shows that prices per square metre are stable.
Prices of residential real estate increased from 2002 until 2008, except for a correction in 2005. In total they increased by 155 percent over this period, Marek Gábriš, analyst with ČSOB bank, told the SITA newswire. The market started declining in the middle of 2008, while the biggest fall was in 2009. The decrease slowed during the following years, but continued until 2012. Prices in the second half of 2012 were 19 percent below the peak reported for the second quarter of 2008.
According to Rážová, people continue to be interested mostly in smaller, one-, two- and three-room apartments either in new or old constructions, depending on how much money they have at their disposal. There is still a group of purchasers interested in bigger and more luxurious real estate, but the properties on offer often do not meet their requirements. Rážová regards the interest in land and family houses as ‘adequate’. But she sees the supply of affordable, reasonably-sized apartments as still being insufficient.
“Smaller one- and two-room apartments with well-set prices are sold quickly,” said Rážová.
Developers prepare better
The residential market has changed significantly over the last few years. Before the crisis almost every residential property, even at the stage of drafting, was sold immediately. Now developers have to take a much more sophisticated approach.
“Many developers have understood the need for a comprehensive preparation phase, whose main part is a detailed analysis of demand and definition of the target group,” Mária Krásnohorská, senior consultant of the residential agency at Jones Lang LaSalle, told The Slovak Spectator. “Nowadays most new residential projects have undergone this initial analysis, which can also be seen in the high number of sold apartments in these projects. New projects do not count on over-sized, large apartments; they begin to lay stress on the effectiveness of the internal space.”
With regards to new residential projects, Rážová divides these between those completed during the boom – and suffering from the change in the market since – and new projects that better reflect the requirements of buyers in terms of size and floor plan.
“However, with regards to prices, I have a feeling that despite previously announced starting prices these are arriving on the market with prices set higher than originally planned,” said Rážová, adding that she does not know the reason for this. She expects that sales of these residential properties will be slower than developers desire.
Jančura, referring to the Bratislava market, as other Slovak regions have relatively small real estate markets, said that there are over 100 residential projects, but the number which have actually been built is very low. Moreover, the prices for high-quality projects are beyond the means of 95 percent of people.
“Surveys show demand for smaller two- and three-room apartments with prices of up to €140,000 including VAT,” said Jančura. “The new offer focuses precisely on these apartments.”
Expectations
Market watchers see the residential market in Slovakia as remaining stable for now, but with some negative signals. They add that it is very difficult to predict the future in such a complicated economic situation.
“The only thing I can say is that I personally do not see any reason for an increase in prices, rather the opposite,” said Rážová. “Standards of living are decreasing, unemployment is growing, the eurozone is torn by the debt and financial crises which may be a time bomb, the business environment is deteriorating. Any of these would not reflect positively on the real estate market. The basic precondition is that people have jobs and stable incomes, and the possibility to draw loans. Only then can the market move forward.”
Jančura also sees the market as having stabilised, but says it is now facing a longer period of stagnation.
“Banks, in particular, can move it forward,” said Jančura. “They can do this by releasing financing for developers or buyers, by offering better conditions and rates. But they will not do this until they see an improvement of the situation in the eurozone.”
Krásnohorská, by contrast, expressed optimism, identifying a gradual revival since the crisis.
“These are precisely the new projects which, when properly set, can become highly competitive against older projects,” said Krásnohorská, adding that optimisation of a property’s internal space can bring developers a higher price per square metre, keeping the absolute price of the real estate unchanged.
