2) Residential Market Update: Sales and Rental Values
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Let’s face it… most investors buying property abroad, and in particular in Central Eastern Europe, are after capital growth… the more and faster the better!
So, how does Slovakia deliver?
First, I can’t stop stressing it often enough – there is no such thing as getting rich fast! There is no growth overnight (or in a month, or even a year) with no work, totally hands-off. Property must be viewed as a long (or at least medium) term investment, and then, only then, it truly pays off. And by medium to long term I mean 5-10 years and more.
Sure, we can see property prices rising year by year, but, let’s think about it for a minute. Just because today new properties cost 10, 15, or 20% more than a year ago, does this mean you can sell your property at 10, 15 or 20% higher price than what you paid for it last year? No. It doesn’t work that way, no matter whether in Slovakia, Poland, France, UK… Developers have a far greater marketing reach and will always be able to get higher prices for their projects than an estate agent selling on your property.
That said, property prices have continued rising in most regions of Slovakia where there is demand from buyers. The construction rates are still lower than in other EU countries and the shortage of properties will take many years to be remedied. However, regions with high purchasing power – led by the capital Bratislava – are finally seeing a more active development market than a few years ago. The result of buyers having a more decent choice for the first time in years is that the type of property and exact location are more and more important these days.
BRATISLAVA
As in the past, the city centre (BA I, Old Town) is the most prestigious and sought-after district of the capital. Better off locals and foreign buyers both compete for the limited number of properties that come up for sale here. As there’s virtually no new(ish) residential construction in the centre, properties are mostly pre-war blocks of flats.
Due to high demand and very short supply Bratislava I has seen the highest price growth, in any given year. We’ve seen prices of city centre apartments going up by roughly 15% p.a., although it depends on each property and top-end flats have been increasing even more.
Note: prices in the following overview are quoted in SKK and per 1 m2. Due to fast changing exchange rates this is a more viable option. (Recently the rates have been 1 GBP = 52 to 54 SKK.) Current rates can be seen at www.xe.com/ucc
Today, prices of apartments in the first district range from SKK 50,000-130,000/m2. While at the lowest range are properties in usually poorly maintained blocks, good mid range apartments can still be bought from around SKK 60,000 a square metre. (At current rates that means decent 1 beds start from 60k GBP, good 2 beds from just under 100k. Of course a top end and large size 1 bed can also cost you 100k and over 200k GBP for 2 beds is also possible.)
Given the very solid rental demand for Old Town properties, and the fact the above prices are far lower than city centre properties in other Central European capitals, apartments in central Bratislava offer, in our view, the best investment potential in Slovakia.
What about other districts?
In BA II, III, IV and V the type of construction and exact area are decisive. While properties in BA I are almost exclusively classic/pre-war (built in the 1900’s to 1950’s), the other four districts of Bratislava offer a mix of communist style blocks (often built of concrete panels hence ‘panelaky’) and new builds.
Prices of new apartments have been rising, in more popular areas by estimated 10-12% over the last 12 months. Even in areas of less demand, for example on the outskirts of the city, have the prices gone up by a minimum of 5% or more. On the other hand, communist built apartments have seen no growth, although the decline in prices witnessed since late 2004 has ceased in most areas now.
Prices of new apartments in Bratislava II currently range between SKK 40,000-70,000 +(19%) VAT/m2. The more sought-after western parts (Nivy) and central parts (Ruzinov) of BA II command higher prices (generally SKK 50-60,000 + VAT/m2) while in the less popular areas in the east of BA II district new flats can be had at under SKK 40,000 + VAT/m2.
Bratislava III has pockets of new construction, including a larger number of new developments in the previously more secluded and exclusive Koliba area, and the vineyards, where more developments will be going up in the future, after rezoning. Prices of new build apartments in BA III are between SKK 40,000- 70,000 + VAT/m2. A planned exclusive new project by Orco group is expected to be released at over SKK 100,000 + VAT/m2.
Bratislava IV is again a very mixed district, with more popular areas closer to the centre (such as Karlova Ves) offering new properties at higher prices than the much less sought-after locations of Dubravka, Lamac or DNV. New apartments can be purchased at SKK 35,000-80,000 + VAT/m2 (only 1-2 projects command prices near the top level, while most come under 50,000 + VAT/m2).
And, finally, BA V, the fifth district and the only one south of the Danube. Traditionally the least popular place with Bratislavans, the area of Petrzalka suffers due to its communist housing estates. The high density panel blocks cover virtually all of Petrzalka, while social infrastructure is poor with limited retail, administrative or leisure facilities.
Development has until recently been very limited due to the low demand. However, thanks to having the lowest property prices of all Bratislava (and good access to the city centre), the area is seeing increasing demand from those buyers who can’t afford to purchase elsewhere. Developers follow, and the number of new projects in Petrzalka is slowly growing. They can be bought at SKK 30,000- 45,000 + VAT/m2.
RENTAL
Bratislava is still the ’safest’ market in terms of rental… apart from holiday lets in ski and tourist resorts. However, as anywhere in Central Eastern Europe, investors who want to have a chance of renting their property need to understand who the tenants are, what they want, and at what prices.
The two main groups of tenants are, traditionally: expats, executives, foreign professors at the one end; lower income workers (often migrants from eastern and central Slovakia) and students at the other.
Demand from foreigners and companies has been very strong – and growing – for the last 15 years. However, these tenants are almost exclusively looking for city centre (BA I) properties, and of good quality.
Rents (net of utilities) in the Old Town of Bratislava are as follows:
1 beds – 450-600 euro/month (more is usually only possible for exceptional top end and/or very large apartments in best buildings and areas)
2 beds – 600-850 euro/month (again, depending on size in m2, quality, exact location and standard of building; in some cases up to 1,000 euro is achievable for top quality)
Due to the high demand and security of rental, as well as reasonable yields (5-7% p.a.), city centre apartments can be considered the best option for buy-to-let.
On the other hand, the second group of (Slovak) tenants consisting of lower income younger workers and new migrants, as well as students, has different requirements. Location and standard is much less important, and budget is the main issue. Demand is for cheap apartments with rents up to 300-350 euro/ month. Tenants often keep their costs down by sharing such properties.
There is demand from this tenant group to rent a property in almost any area of Bratislava provided the rents match. Due to lowest rental values, Petrzalka is filled with students and new migrants, renting mostly cheap panel block apartments. So is the Dubravka area in BA IV. Lower cost apartments in Ruzinov are also popular.
Anything that does not target or appeal to the above two tenant groups can be very hard to rent. As in most of Central Europe, middle class local population does not rent property, they buy resp. live in owner occupied homes.
So, the advice is… do your research, buy well, hold for several years… and then you will enjoy the fruits of your investment!
Whatever your requirements, email us at: info@slovakiainvestmentproperty.com