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Housing stalled

One of the most important pre-election promises of the largest opposition party, the SDK, was an enormous increase in housing construction. "From 1999 to 2002, we'll build an average of 14,000 flats a year," reads the party's programme. But while new housing in Slovakia has shown an overall uptrend in 1998, the current dire shortage of state finances suggests that the SDK will find its housing promises tough to keep over the next few years.
During the first half of 1998, the number of completed flats climbed to 3,506, a 21% increase over the same period last year. The increase in housing starts - 92.2% - was even more dramatic. However, the Ministry of Construction and Public Works had originally planned for 10,000 new flats in 1998, which means that even the improved housing figures fell 35% short of the target for the first half of the year.

One of the most important pre-election promises of the largest opposition party, the SDK, was an enormous increase in housing construction. "From 1999 to 2002, we'll build an average of 14,000 flats a year," reads the party's programme. But while new housing in Slovakia has shown an overall uptrend in 1998, the current dire shortage of state finances suggests that the SDK will find its housing promises tough to keep over the next few years.

During the first half of 1998, the number of completed flats climbed to 3,506, a 21% increase over the same period last year. The increase in housing starts - 92.2% - was even more dramatic. However, the Ministry of Construction and Public Works had originally planned for 10,000 new flats in 1998, which means that even the improved housing figures fell 35% short of the target for the first half of the year.

What's more, the majority of the completed flats were undertaken by the private sector (72% of completed flats, 83% of starts), a total reversal from the communist regime when the government looked after the housing needs of its citizens.

Critics from the former opposition parties said the state had resigned its housing role. "The State Fund for Housing Development (ŠFRB) disbursed no money for 1998," said Ľubomír Ficker, the SDK's expert on housing issues. "Applications for loans from 1997 haven't been processed yet, and the fund is currently insolvent."

Even Construction Minister Ján Mráz admitted that the housing sector was facing tough times. "I have to say that the Slovak Republic has not yet reached the desired state in flat construction," he told guests of the Coneco international construction fair in Bratislava in March.

Mráz had reason to be modest: the pace of flat construction in Slovakia has fallen to about 25% of the European average. EU countries build about five flats per thousand citizens annually, whereas Slovakia completed 1.2 flats per thousand citizens in 1997 (to compare, in 1989 the rate was 6.3 flats per thousand).

"To reach the EU level, Slovakia would have to construct another 500,000 flats which, regarding the current efficiency of the Slovak economy as well as available finances, is not realistic in the short term," Mráz explained.

Private sector help

Most Slovaks looking to buy a flat or house are totally dependent on loans: housing prices have increased five-fold in parts of Bratislava, while a three-room flat currently goes for twelve times the average annual Slovak wage. Currently, there are three major loan providers in the housing sector - the previously-mentioned ŠFRB state provider, and two construction savings banks - Prvá stavebná sporiteľňa (PSS) and VÚB Wüstenrot (a branch of VÚB, the second largest state bank).

ŠFRB offers housing buyers who are under 35 years of age a maximum 500,000 Sk ($13,500) loan at 3% interest along with a 150,000 Sk bonus that does not have to be repaid. In order to get the loan and the bonus, buyers have to prove they have 20% of construction costs.

While the state loan, with its 30 year maturity and low interest, is on paper the best programme on the market, the government's acute shortage of cash means that housing buyers are far more likely to receive tangible assistance from the two private loan providers.

The PSS programme offers up to 5 million Sk ($135,000) at 6% interest over 8 to18 years. One of the prerequisites, however, is that loan applicants have 50% of the required sum in their accounts, a clause which puts big loans out of the range of ordinary Slovaks.

One of the biggest problems with construction savings banks, according to the SDK's Ficker, is "the lack of 'friendly' savers," - clients who keep money deposited in the bank for a long time while saving the necessary 50% to qualify for a construction loan. The majority of bank customers, he said, prefer to amass the 50% of costs quickly and then take an immediate loan rather than save up over many years, creating a situation in which there were more people 'taking' money out of the bank in loans than 'giving' in long-term savings.

Mária Motyčková, Marketing Service Director with PSS, supported Ficker's conviction. "In the first half of 1998, we received 11,818 loan applications," she said, "but only 1,734 [15%] of them were regular loans [taken after many years of saving]. 10,084 [85%] were the immediate type of construction loan."

The future of flat construction, according to experts, lies in mortgages. Currently, there are three banks offering mortgages in Slovakia, but the loans they offer have to be secured by existing real estate, a practice which, according to Róbert Fico of the reformed communist SDĽ party, "is totally against the philosophy of mortgages, which should be secured by the object itself, financed by the mortgage." Fico, who has proposed an amendment to the mortgage law in the Parliament, said he believed that "when the appropriate legal and economic steps are taken, mortgages will greatly assist flat construction in Slovakia."

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