The number of apartments under construction hits record high

Demand and rising costs have increased the price of residential real estate.

Illustrative stock photoIllustrative stock photo (Source: SME)

At the end of the second quarter of 2018, apartments under construction numbered 76,000 in Slovakia. This is the highest number since 1996 when the Slovak Statistics Office began to register this data. Because the figure for residential real estate under construction in the early 1990s was low, figures from the second quarter of this year are the highest since the launch of independent Slovakia in 1993, the Trend weekly reported.

In spite of this, demand for new real estate, thanks to record breaking low interest rates on mortgages, is so high that prices for old apartments are rising too. They have increased by 7.2 percent y/y while prices for new real estate grew “only” 6.7 percent y/y.

Prices are driven up not only by demand but also costs when the construction boom itself increases prices not only of construction materials but especially wage costs. Prices for construction work have increased by only 3 percent y/y, but the average wage in the construction sector has already increased by almost 8 percent.

Under the continuing low interest rates, decreasing unemployment and economic growth, construction of residential real estate as well as prices for real estate may further increase. This is also because Slovakia still has, compared to the average of the European Union, a low ratio of apartments to the number of citizens as well as a high share of the population living in overcrowded dwellings – 38 percent in 2016.

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