Property Market at Crossroads

The crisis came to Slovakia in the middle of the biggest property boom of the last twenty years. Many new buildings had gone up but many older buildings had only been demolished – the capital, especially, is full of rubble sites and half-built buildings completion of which is now frozen indefinitely.

Common wisdom says that you should buy property during a fall in the market and sell when the market is growing. In Slovakia thousands of people have done the opposite and thus we have the first generation of people with bad experience of the property cycle. Since the end of Communism, property prices have only gone in an upward direction – until now, that is. The current fall in prices is a new phenomenon.

The government is now alone in investing in new buildings. They are building big new ‘national’ sports centres: first they built the National Tennis Centre and now they are working on new ice hockey and football stadia. Another major project could be a multimedia centre for public television, radio and the public press agency. This government flagship ‘megaproject’ in the centre of Bratislava is being scotched by one of the ruling parties, however, and so may not actually materialize.

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Despite the fact that customers are constantly looking for new two- and three-room flats, there is still a glut of them on the market and many new such properties are unsold. Perhaps it is their design which makes them unwanted or the fact that their large area makes them too expensive.

There is still a market demand for flats but the offer range has still not adapted properly to meet it. Developers that were offering properties which were simply too luxurious for most people are returning to reality, however, for instance by dividing some of the larger new apartments they have built into smaller flats.

While in the last few years it was enough for a developer to have a project approved and most of their new apartments would be sold, today properties ‘on paper’ are simply not selling. Only completed flats and houses have much chance of being sold, or, in some cases, flats, houses and office premises just a few months before completion. Developers however are trying hard not to lower the price of new apartments too far and it is only the prices of more luxurious buildings which have fallen very much.

According to analysts, it is the banks that will have the decisive word this year. There are two possible scenarios: the first is that they will stop lending money until the supply of unoccupied new properties has dried up. Afterwards, customers forced into a corner will again start buying flats and offices on paper, places which will not be finished for a few years. The situation of a few years ago when there was a shortage of new flats and prices shot up excessively and so deformed the market could recur.

The second scenario, which would be much better for the country, is that the banks will negotiate with the developers but will set tougher conditions. Developers will have to put into projects more of their own capital while the banks will have to make more accurate analyses of every risk. As the editor-in-chief of TrendReality.sk, Peter Kremský, says, it is expertise, experience, intelligent guesswork and the quality of architecture and building work which will establish themselves in the market. For the first half of the year he predicts a small fall in the price of flats but in the second half, prices will rise slightly. 

Author: Andrea Ertlová

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