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Crowdestate sees an opportunity to enter the Slovak market due to the tightening of bank conditions for financing real estate projects.
Overview of the Slovak real estate market
According to the National Bank of Slovakia, there was a year-on-year increase in average prices of residential real estate by up to 11.9% last year (the highest increase was in Banska Bystrica Region). The Bratislava Region has up to 92% of the total growth in real estate prices. Since 2014, when the real estate market bottomed out after the financial crisis, real estate has grown by 44.5% by the end of 2020, while apartment prices have risen by as much as 60%. The rise in residential property prices is likely to continue for a long time to come, as interest in new housing far exceeds supply.
The strong demand for real estate is mainly influenced by:
- Demand for real estate continues to exceed supply. According to the Institute of Urban Development (IUR), more than 220,000 flats are missing in Slovakia, while the largest number is missing in Bratislava (approximately 40,000).
- There are fewer housing units under construction. Year-on-year, the number of started residential projects decreased by 4.4%, at the same time many developers decided to suspend the implementation of their plans due to more difficult access to financing from banks. In the January 2021 the year-on-year decrease in total construction output was as high as 19,8%.
- The growing trend of home office, has changed the minds of many people who prefer larger properties in peripheral areas and adjacent villages, compared to expensive 1 and 2 bedroom apartments in city centers. This trend is also increasing interest in recreational real estate throughout Slovakia. Prices of recreational real estate increased by up to 15% in 2020 (mostly in the High Tatras and Liptov).
- However, the most important factor remains the historically lowest interest rates provided by banks on mortgage loans to consumers. Currently, average interest rates have fallen below 1% p.a.
- In Slovakia, on average up to 3 people live in one household and up to 36% of Slovaks live in overcrowded households. In addition to the factors mentioned above, the strong demand for real estate is also caused by young people who are currently looking for their first home or moving to a larger one and keep their original housing for rent.
Pandemic situation also caused the interruption of many real estate development projects, as well as the postponement of the start of construction. This was due to difficult access to bank financing for developers, as well as the disruption of some important supply chains, which significantly extended delivery times and increased building material prices by tens of percent – for example, the price of timber increased by up to 50%.
In Slovakia, almost 90 % of people live in their own property. 8.5 % of Slovaks live in rental apartments at market prices, 1.5 % of people use subsidized rental housing. There is an acute shortage of rental housing in the market, mainly in cities. The construction of rental housing is also actively supported by the state, primarily through cheap financing from the State Housing Development Fund (ŠFRB). The government wants to support the construction of up to 30,000 rental apartments a year.
Jan Kornaj is the new Crowdestate’s representative on the Slovak market. Jan has been assessing real estate investments since 2013. From 2014, he searched for investment properties for groups of Chinese investors until 2018, when he gradually began to focus on Slovak clients. He has experience working for two crowdfunding companies, an excellent overview of the Slovak real estate market and good relations with local developers, which will bring new, interesting and profitable investment opportunities for Crowdestate investors.
We believe, that the Slovak real estate market can bring quality and profitable investment opportunities to Crowdestate investors.