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Tuesday, March 21, 2006

Slovakia - Eight Regions - Many Opportunities

Slovakia is divided into 8 self-administered regions, each having its own capital: Bratislava, Trnava, Trencin, Nitra, Zilina (western Slovakia), Banska Bystrica (central Slovakia), Kosice and Presov (East).


(www.trnava.sk, www.zilina.sk)

Most of the wealth is concentrated in Bratislava followed by other main western Slovak cities. These are also likely to be of most interest to a property investor. The reasonsare simple - solid economy, growing investments (foreign as well as domestic), excellent infrastructure, favourable business environment.

This, along with relatively low unemployment and higher prosperity of the population makes Trnava, Zilina, and to a lesser extent Trencin and Nitra into exceptional markets for those looking for untapped opportunities... including low prices, low competition, and potentially high returns.

Trnava and Zilina are perhaps no longer a secret tip in Slovakia, but are still virtually unknown abroad. Both of these historic cities have lots in common:

- great infrastructure and accessibility (air, road, rail)
- fast growing economy
- rich history, culture (as well as being main university towns)

Trnava further benefits from the proximity to Bratislava, while Zilina - Slovakia's 3rd largest city - is close to the Czech and Polish borders, as well as located in a very significant tourist region, with top ski resorts, thermal spas, and historic monuments just a short drive away.

Most importantly, both Zilina and Trnava are getting a massive economic boost set to transform the cities and their population. They have received the largest foreign investments Slovakia has ever seen -

In late 2005, PSA Peugeot Citroen completed their Trnava car plant starting to produce 300,000 cars p.a. from 2006 (as well as announcing construction of a second smaller plant by 2008)...

... while one of world's fastest growing car makers, Korean giant Kia Hyundai, is building their first-ever European production base - in Zilina - a huge 1.1 billion euro investment. Production of 300,000 cars p.a. should start in 2007.

Zilina and Trnava have a solid property market backed by the relatively wealthy population, with high demand for good quality property and new construction. However, and importantly for a property investor, they now also offer something most areas of Slovakia don't - a strong and growing rental demand.

After all, 10,000+ new jobs are to be created in each city, attracting thousands of workers from all over the country, as well as foreign staff. The population of Zilina (ZA) and Trnava (TT) is set to grow significantly in coming years, further fuelling the local property markets.

Key facts for property investors in ZA & TT:

- demand for new & good resale properties many times higher than supply
- solid capital growth expected on quality properties
- the only viable (albeit new) rental markets outside Bratislava (not counting holiday lets in tourist areas)
- low prices compared to the capital (new built flats in Trnava at GBP 650 - 720/m2 incl. VAT; new apartments in Zilina at GBP 550 - 880/m2 incl. VAT)

(www.trencin.sk, www.nitra.sk)
While the residential market in Trencin and Nitra doesn't currently offer much potential to an investor looking for rental, these relatively wealthy towns will no doubt see a growing property market in the coming 3+ years. With a lack of a current rental market investors may want to keep an eye on the two towns and any potential larger investments they may receive in the future.

New developments are rare at the moment, with one or two new apartment blocks in Nitra being sold at approx. GBP 550/m2 incl. VAT.

The more adventurous commercial property investors may find good opportunities in retail and mixed-use properties in the town centres of Trencin an Nitra, offering low prices and solid yields. While similar properties are virtually impossible to get ahold of in the hot markets of Trnava and Zilina, Nitra and Trencin are not yet on the investment companies' radar.


Banska Bystrica benefits, to certain extent, from its proximity to popular ski resorts in the Low Tatras and Velka Fatra mountains. However, it is not close enough to offer a viable holiday let alternative, while long term rental market is also virtually non-existent.

What's more, the city is in one of Slovakia's economically weakest regions, with relatively high unemployment and less than ideal infrastructure.

Although the ski resorts are starting to offer some tourist letting opportunities, other areas of central Slovakia (including Banska Bystrica) are unlikely to attract property investors in the short-medium term.

Prices in BB are low, corresponding to the economic situation; new properties can be had from around GBP 400/m2 incl. VAT.

(www.kosice.sk, www.presov.sk)

The eastern parts of Slovakia belong to the least developed and economically worst-off areas, with 20%-30% unemployment, poor infrastructure and little investment. The respective regional capitals of Kosice and Presov offer accordingly limited opportunities in terms of property investment.

Kosice may attract some of the most adventurous buyers focusing on the size of the country's second largest city. While there are some pockets of relative wealth in Kosice (compared to the rest of eastern Slovakia) it is in the middle of a very poor region and we don't expect stable returns on investment in this area at present.

New built properties in Kosice can be bought from approx. GBP 450/m2 incl. VAT.

The Presov region is the most troubled part of the country, with little hope for any serious improvement in the medium

The general consensus is until there is a significant infrastructure improvement in eastern Slovakia, major
investment will keep avoiding this part of the country. The badly needed highway connection should be extended
to Kosice in approximately 10 years time. (Currently the highway runs from Bratislava up to Zilina.)


For those looking for holiday lets as well as, potentially, own use of a vacation home, Slovakia's top 5 ski resorts provide a good alternative and growing rental potential.

The country's five star ski resorts are:

Jasna, Donovaly, Velka Raca - Oscadnica, Strbske Pleso, and lately also Plejsy.

The ski resorts are in fact dual season, highly popular in winter as well as summer. The visitor structure is split between Slovaks and foreigners (most from surrounding countries). Although property prices in the resorts are often comparable to Bratislava, good property will likely continue to see solid growth as a result of very limited supply (severe building restrictions in what are mostly National Park areas with high protection degree).

Some of the gateway towns for ski areas such as Poprad may offer limited holiday let potential, but, if rental
income is important, buying closer to the slopes is a much safer option. While visitors often stay in Poprad for a
day or night, the majority will not be willing to drive or 30+ minutes each day to get to the nearest slopes.

Some of the (many) spa towns in Slovakia have good tourism potential, however, visitors tend to stay in hotels to
have spa and medical treatments, accomodation and catering all under one roof. Hotel capacities are more than sufficient
in all Slovak spas; accordingly, private letting is unlikely to be profitable.


In general, other areas of Slovakia are unlikely to offer much to a property investor for the foreseeable future. For those looking for a cheap holiday home there are plenty of picturesque locations and villages that may just suit.

However, no price growth or rental potential can typically be expected. A good example are homes in the many small villages throughout all regions of the country. With no economic perspective and leaving population property prices are very low - houses can often be had from GBP 10,000 (particularly in central & eastern Slovakia and the poor areas of the south, close to Hungary border). And, they are likely to stay at similar values for the next many years.

Naturally, locations close to Bratislava benefit from the proximity to the capital and its strong economy, and accordingly property prices are higher.

From the February 2006 Slovakia Investment Property Newsletter

Bratislava - Eurovea waterfront development

Bratislava - Eurovea waterfront Development

What is the city going to look like around the Eurovea waterfront development? The area is commonly referred to as "The Ballymore area." It is interesting to look into what is expected in its immediate neighborhood, as well as across the river, by 2010.

Ballymore advertises its project as "Central Europe's most sophisticated mixed-use riverside development." with "Over 200,000 sqm of corporate offices, retail galleria, hotel, casino, multi-plex cinema, riverside apartments and waterfront park." The city is expecting 150 shops, a 200-bed 5-star hotel, 23,000 m2 of office phase in the first phase (with 87,000 m2 office planned for the 2nd phase), and 250 Danube apartments there.

With the completion of the Apollo Bridge in Sept 2005, the fifth bridge over the Danube, the vast areas on both sides of the river in this absolutely central location suddenly became accessible for development, where the standard was set by this beautiful state-of-the-art bridge. The Capital City claims: "Contemporary strategic investments in Bratislava are now being focused on the Danube River banks. The main bus and railway stations will also soon undergo substantial changes."

There are major plans submitted regarding high-rise residential and commercial buildings, as this is the area (on the north bank of the Danube) specifically zoned for skyscrapers in Bratislava, where the maximum height allowed is 125 meters. The neighboring Old Town only allows for 19.5 meters, that is 5 floors plus roof. One developer has already received permits to construct 8-10-floor residential and office buildings, 10-12 city blocks in all.

There are plots for sale, along with planning permit. For example one residential developer has received permission to build 75,000 m2 sellable floor space according to current plan, however, is redesigning in order to make it 100,000 m2, will be ready Aug-Sept 2006. Currently there are 204 units in four buildings, where smaller investor-friendly apartments, 1-beds, 2-beds are planned. They will be ready to sell off-plan by Aug 2007, early 2008, and the buildings will be completed in 2010. Construction costs are estimated at 650-700 mln SKK (17.5-19 mln EUR), the builder will be Skanska and/or Strabag. Prices would be 48,000 Sk (1300 EUR) /m2 + 19% VAT. They would prefer to sell the whole project off-plan to a single investor. They also need an investor for a hotel in same location, for an advance contract with hotel improves developer's position with the banks. This is just an typical example of what is happening behind the scenes in this newly created administrative and commercial center of Bratislava (Central Business District). Send an email to info@blavablava.sk for more info.

HB Reavis is building the new bus station in Nivy. J&T Global is planning 3 further 100 meter-tall towers around Tower 115 (Press Center), the tallest building in the city.

With regard to the municipal plan, the city also puts great emphasis on a new all-city center situated on the right bank of the Danube, opposite the Ballymore investment, where a state-of-the-art multi-purpose hall seating 12,000 people is envisaged. This will primarily be an area of office buildings to take advantage of the superb Danube views and excellent transportation along the motorway connecting the airport and Eastern Slovakia with Austria, the Czech Republic, and Hungary. It is also just across the river from the city center, so residents and employees in the high-rise buildings will enjoy the classical Castle view. This is where the Vienna Park Apartments are located, the first residential and commercial project to begin sales in this new business district. http://blavablava.sk/vienna.htm The ground-breaking venture on the right/south side of the river was the successful Aupark shopping-entertainment mall, the largest and most successful regional shopping center in Bratislava, with a guaranteed property return of 7.75%, which is being expanded by HB Reavis with an investment of 54 mln EUR. There are already a number of A-class office buildings along Einsteinova Street, where the Digital Park, opposite Aupark Mall, will be one of the most prominent points of attraction for commercial space. www.digitalpark.sk.

You can still reserve residential or commercial space through CE Invest in these riverbank developments, where the city will never be the same again. We will send you visualizations of what the district will look like by 2010, from the city planning office, upon request.

From the March 2006 Bratislava Property Newsletter available at

Monday, March 06, 2006

Rental Market in Slovakia - Overview

Over the last two years Slovakia has been attracting growing numbers of mostly British and Irish property investors looking for buy-to-let opportunities. Although the numbers of foreigners owning residential property in Slovakia are still very low (in the low hundreds by estimate), they will increasingly make a disproportionately significant impact on the country's rental market.

To start, there aren't many rental markets in Slovakia in the first place. Slovaks are owner occupiers; owning a home is the #1 goal for anyone passing the age of 20.

The country has a 95% owner occupancy rate. Only 3% of property is privately rented (further 2% are municipal flats rented to socially weak families).

In the years following the fall of comunism (1989), families - until then living in yments for any given property are (mostly significantly) lower than the rents (for such home).

So, are there any potential tenants, and who are they?

Well, to answer this question, we need to be more area- specific. There are very few rental markets in Slovakia (larger cities having either a large expat community or/and student population), while most smaller to medium towns (and of course villages and countryside) have no rental demand at all. Generally speaking we see two types of tenant.

The first group - students, low income workers, new migrants - rents cheap apartments at rents of 200-300 euro per month, mostly shared by several people. Typical properties are communist built "panelak" flats in areas such as Petrzalka(Bratislava V), and parts of the districts II and IV.

Although rental yields of such properties can be reasonably high (rented on a shared basis), they are unlikely to be a target of property investors. The reason: communist flats are no longer experiencing any capital growth and are, in fact, going down in price in many areas.

The second tenant group consists of foreign expat tenants and companies. The largest and longest established market catering to expats is Bratislava, with one or two secondary cities currently seeing a surge in demand due to significant foreign investments and new concentration of international companies (the new car centres of Trnava and Zilina).

Foreign tenants are, however, very particular in terms of property and location, especially in Bratislava, that is not only geographically larger but also offers a wider supply of quality property.

The area of choice for most expat tenants is the city centre (BA I). Good quality flats in well maintained blocks can be rented out at 500-800 euro/month for 1 beds, and 700- 1,200 euro for 2 beds. Larger apartments can achieve up to 2,000 euro/month, however, most foreign tenants look to spend a maximum of 1,000 euro for a 2 bedroom apartment. Rental yields currently range from 5-8% p.a. gross.

Newly built properties with parking can be let (in BA I) at 20% higher rates as they are extremely rare in this area (virtually all property in the city centre consists of classic pre- and post-war blocks; as the name of the 1st
district implies, it is the 'Old Town').

Investors with preferences for new built properties will usually have to look outside the historic city centre, yet should opt for the shortest possible distance to
the centre itself. The further outside of Bratislava I,the lesser demand there is from foreign tenants and companies.

So, while new built properties are popular in Slovakia (with Slovak buyers = owner occupiers), they are not necessarily a sure let. What matters most is a central
location, and high quality property; Whether new or classic (pre-war that is, not communist built) is less important.

Plus, given the extremely high demand for property in the first district, and no new supply, the city centre has also been the area of highest price growth over the last
few years.

Stare mesto (Old Town, BA I) has always been the location of choice for many wealthier Slovaks to buy a flat - or, at the very top end, a villa on the Castle Hill - and this demand will certainly continue for the foreseeable future.

A new factor over the recent year or so are the increasing numbers of foreign buyers purchasing in Bratislava. Although the overall numbers are very low, and as such have no impact on property prices, they will be noticed in the
rental market.

While 99% of property is sold to Slovaks who are mostly owner occupiers, most foreign buyers are purchasing flats with the objective of letting. In a limited rental market, even a couple hundred new rental properties can make an impact. Therefore, as more properties are purchased by investors, increasing the supply of good quality rental property in Bratislava, the tenants, until recently having few options of high standard property, will have more choice.

This may create downward pressure on rents (to a lesser extent) and, more likely, increase the void period between tenancies. Increasingly, estate/letting agents with good links to foreign companies with offices in Bratislava will be of advantage. Companies tend to transfer a larger number of staff to Slovakia at once, which often creates cycles of very high to low rental demand.

While the Slovak property market continues to offer some of Europe's best opportunities, with low prices and healthyand solid growth (for the right type of property in the
right area), it is important for an investor to understand
the dynamics of this market.

The correct choice of a (central) location with solid present rental demand, and good quality property (high standard fittings are increasingly making a difference)
are pre-requisites for successful letting in Bratislava.

And, of one thing you can be sure: as virtually all property sales go to locals, 95% of whom, as we have seen, are owner occupiers in their (family) apartment or house, you will always be able to sell your property on to a Slovak buyer,
ensuring a safe exit strategy.

From the January 2006 Slovakia Investment Property Newsletter