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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).


* TRNAVA & ZILINA *

(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)


* TRENCIN & NITRA *
(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 *
(www.banskabystrica.sk)

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.


* KOSICE and PRESOV *
(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
term.

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.)


* TOURIST AREAS *


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.


* OTHER LOCATIONS *


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

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