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Slovakia: Slovakia

Guide to the Risk and Opportunity Ratings

At the end of each country profile, we have given a risk rating and an opportunity rating. These ratings are a summary of our analysis indicating the levels of risk when investing in a market and the level of opportunity to profit from it.

The ratings themselves are simple. Both work on a scale of one to five. The opportunity rating is indicated by the $ symbol. A single $ equals a low opportunity whilst 5 of them ($ $ $ $ $) equals the highest opportunity ranking.

For risk we have used the * symbol. A ranking of * equals a low risk rating whilst * * * * * equals a high risk rating.

Introduction

Tell people you are interested in buying property in Slovakia and they will probably assume that you are looking to Bratislava, a city which is attracting buyers who see the Slovak capital as the next Prague. These buyers see rising prices and growing prosperity of the kind experienced in Prague ten years ago, and hope that the city will avoid some of the problems of rampant tourism which have hit the Czech capital.

Yet Slovakia is not a country where the capital is the only place to buy. The High Tatras, eleven of which are over 2,600m (8,500ft), is one of the most attractive high mountain ranges in Europe and offers the only truly alpine standard skiing in Eastern Europe. Slovakia has more natural beauty than most of the markets which provide direct competition and as advertising budgets become more generous, tourism figures are increasing. Tourism arrivals rose 6.4% to a healthy 15.2 million in 2005.

Is this a good place to buy?

The reasons to buy in the Slovak Republic can be grouped under two headings; rising prosperity and ideal location. Slovakia was one of the first investment markets, the poster child of the 2004 EU entrants, and is now in competition with the Baltics to be acknowledged as the most successful country of the group.

Slovakia has one of the fastest growing economies in Europe. In 2004 the country was nominated by the World Bank as having the most rapidly improving investment climate globally. A big part of this is the introduction of a flat tax system, which has since been adopted across Central Europe. The flat tax of 19% makes dues easy to calculate and has enabled the government to abandon other charges such as stamp duty.

Slovakia is now performing even better than the Baltics. Between June 2004 and June 2005 real wages rose more than 7% – making a very real difference. The latest assessments suggest that entry into the Euro zone will be delayed for Estonia and Latvia, but that Slovakia will enter the euro in 2008/9. If so, buying property or taking out a mortgage will become even easier, and the property market in Slovakia will be given a boost against regional competition.

Slovakia’s second advantage is its enviable location in Central Europe. The republic is bordered by Austria, the Czech Republic, Poland and Hungary, and therefore links the prosperous western countries with the new emerging markets and manufacturing wealth of Eastern Europe.

Bratislava is two hours from Budapest and three from Prague. Property fortunes have also been made out of the close links between Bratislava and Vienna. The capitals are separated by only 30 miles, but Slovakia’s communist past ensured that property values diverged hugely. Much of the post 2004 increase in house prices in Bratislava has been caused by Viennese workers buying up cheap property in Bratislava and commuting to work.

The city’s enviable transport links are another advantage. The city is served by two international airports in Slovakian territory as well as the airport in Vienna and a high speed rail network. This makes Bratislava a firm favourite for weekends away and for inter-railing tourists, a position also justified by the beauty of the Old Town. Cheap flights from the UK were introduced in 2005 and additional routes are expected in 2006.

Price history

Like many of the new European member states Slovakia has a real estate market sharply divided between an expensive capital and much lower prices throughout the rest of the country. In Bratislava prices are now comparable with any other European capital, with apartments selling for up to 200,000 euros (£135,000/$235,000). In the countryside it’s not uncommon to find a villa for as little as 30,000 euros. At the time of writing, a working pub and attractive holiday home was on sale in the High Tatras for 13,000 euros (£9,000/$15,500).

Property prices are believed to have increased by 50% in some areas in the eighteen months between the beginning of 2003 and mid 2004. They then stabilised, but it is clear that prices are increasing again now and will continue to do so. Within Bratislava attractive older properties are likely to sell at a premium, but may also be subject to more problems with property title and alterations which lack planning permission. There is a choice; just as developers have begun constructing good quality residential projects in Prague, Bratislava has some eye-catching projects on the shores of the Danube. These developments are comparatively expensive; one bedroom flats cost from around $100,000, but expected rental yields are 9%.

Local experts talk about a shortfall in the supply of apartments – although with up to 40,000 apartment units planned over the next 15 years, this balance between supply and demand may not last forever. Downtown Bratislava is tipped as the best place to buy, as the local government is committed to a beautification programme which will ensure that this is the place to be.

In the countryside an older home might have greater charm, but renovation might not be worth the effort. The winters are cold in Slovakia, with temperatures falling to –20 degrees Celsius and any older property will need a reliable heating system to be installed.

More pages

Page 1: Guide to the Risk and Opportunity Ratings
Page 2: Buyers this market will appeal to
Page 3: Mortgages

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