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Market not dead, just fast asleep

The real estate market in Slovakia has its roots in the fall of the iron curtain in 1989, when sweeping changes in ownership rights occured, restitutions and privatisation began, and the first private entrepreneurs appeared.
The property market in the early 1990's saw an abrupt growth in the value of each type of property. Purchase and rental prices for residential real estate soared to unbelievable heights in 1991 and 1992, as many Slovak citizens and expats working for foreign companies sought more comfortable living arrangements in family houses and villas. The expanding business activities of foreign companies in Slovakia sparked a boom in commercial real estate as well. New offices, shops, stores, warehouses and plants sprang up as the property market took off.


photo: Andrea Tašárová

The real estate market in Slovakia has its roots in the fall of the iron curtain in 1989, when sweeping changes in ownership rights occured, restitutions and privatisation began, and the first private entrepreneurs appeared.

The property market in the early 1990's saw an abrupt growth in the value of each type of property. Purchase and rental prices for residential real estate soared to unbelievable heights in 1991 and 1992, as many Slovak citizens and expats working for foreign companies sought more comfortable living arrangements in family houses and villas. The expanding business activities of foreign companies in Slovakia sparked a boom in commercial real estate as well. New offices, shops, stores, warehouses and plants sprang up as the property market took off.

By the middle of the decade, both the residential and commercial real estate markets had stabilized, as financial limitations for the first time capped growth. Foreign investors were not rushing to investing in Slovakia as had been predicted, due to the political instability in the country as well as to legislative barriers. Despite these hindrances, however, significant growth did occur in the construction of finished flats and family houses, large multi-functional buildings, new ecologically-sound plants, shopping centres and so on.

The current situation on the real estate market remains stable, but prices are dropping and supply exceeds demand many times over. Although the national property market is in fact two distinct parts - Bratislava and outside Bratislava - this trend can be observed all over the country.

Bratislava's property market is very dynamic, with a wide range of real estate commodities and prices sometimes reaching outrageous levels. The 'outside Bratislava' property market, meanwhile, has always been something of a side-show, with purchase and rental prices half or even one-tenth of what similar properties would command in the capital. In Slovakia's regions, the variety of real estate available is not as wide as in Bratislava, while the purchasing power of citizens is relatively weak and large investor interest remains focused on the Bratislava market. But the current trend of falling prices affects real estate all over Slovakia.

Real estate serves as an indicator of the economic situation in the country, and closely reflects the legal environment as well. The property market is currently facing several serious obstacles to its further development. The most significant is the lack of financial resources among potential buyers or tenants, a situation that obviously dampens interest in costly projects like the mass construction of flats.

Bank loans are available only to those citizens who already have a certain amount of money, while mortgage programmes are inefficient. Corporate entities are discouraged from borrowing to finance development by high interest rates, while foreign investors face so many unreasonable conditions in doing business and contending with other Slovak 'specialities' such as corruption and non-transparency that it is a miracle that the country has attracted any investment at all. As a result, the current property market could be compared to a 'Sleeping Beauty' awaiting a financial kiss.

Andrea Tašárová is the Secretary General of NARKS (the National Association of Real Estate Agencies). She can be reached with questions or comments at narks@narks-real.sk

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