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Everything you need to know is included in our Slovakia Property Pack
Are you thinking of investing in property in Slovakia? Are you wondering if it's more advantageous to buy at this moment or defer until next year?
People have different views on market timing. Your Slovak friend may suggest that it's currently a good time to buy property, but your colleague residing in Bratislava might advise waiting for better opportunities.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Slovakia, we facts and data that are backed by evidence, not just opinions or rumors.
After thoroughly analyzing official reports and statistics available on government websites, we have gathered solid information in a database. Here are our findings that can assist you in determining whether it's the right time to invest in real estate in Slovakia.
Let's delve in!
How is the property market in Slovakia currently?
Slovakia remains, today, a very stable country
Positive
Stability promotes property ownership, rental demand, and sustainable growth, making it vital for real estate investments. It is an information you need as a foreigner looking to buy a property in Slovakia.
You most likely already know that Slovakia is widely known for its remarkable stability. The last Fragile State Index reported for this country is 37.1, which is an impressive number.
Slovakia has a strong economy with a low unemployment rate, and the country is committed to furthering European Union integration, which helps to maintain stability. Additionally, Slovakia has strong regional and international ties, which have helped to promote a sense of solidarity and stability within the country.
Stability check done. Now, it's time to review the economic forecast.
Slovakia is poised for strong growth
Positive
Before buying a property, see how well the country's economy is doing.
Based on the IMF's outlook, Slovakia will, in 2023, grow by 1.3%, which is positive. For 2024, the figure we're looking at is 2.7%.
The pace will even accelerate since Slovakia's economy is expected to increase by 11.1% during the next 5 years, resulting in an average GDP growth rate of 2.2%.
The expected sustainable growth rate in Slovakia is a good thing for someone who wants to invest in real estate in this country because it indicates that the real estate market is expected to remain strong, and that real estate investments are likely to appreciate in value over time.
Now, let's delve into other metrics worth exploring.
Slovak business owners have become skeptical of the economy
Negative
The GDP forecast is not enough to fully capture the local sentiment, as it relies solely on external projections and may overlook important factors. Thankfully, in Slovakia there is an established metric that is routinely disclosed. This doesn't apply to every country, so we're in luck.
The Business Consumer Index (BCI) is a metric that quantifies the confidence business leaders have in the economic conditions, encompassing both the present and the future. It relies on surveys and assessments.
The Statistical Office of the Slovak Republic's data indicates that the Business Confidence Index is currently -1 for Slovakia. It is definitely a small score.
Taking a more in-depth look at the data, we notice a troubling pattern: the score has experienced a decrease in 12 months, it was indeed at 19.
The current Business Confidence in Slovakia is not at its most optimistic. However, this does not necessarily mean that the property market will collapse. A lower confidence score often signifies a temporary phase of uncertainty or caution within the business sector, which is a normal occurrence in economic cycles.
Thus, it is essential to take into account other key metrics before determining whether it is a suitable time to invest in property in Slovakia. Let's continue.
Slovakian property prices surge with accelerating growth
Positive
Slovakia's home prices have increased by 54.3% in 5 years according to eurostat.
It means that if you had bought an apartment in Bratislava for $300,000 five years ago, then it would now be worth around $463,000.
Recently, property prices in Slovakia have been growing at an accelerating rate. The market has witnessed a surge in property values.
It's a good sign if you're thinking of buying a property in Slovakia. The market is active and experiencing growth. However, it might be wise to wait for a market correction. This way, you can potentially get a better price for your investment.
You can find a more detailed analysis of the real estate prices in our property pack for Slovakia.
Everything you need to know is included in our Slovakia Property Pack
Slovakia's population is getting richer
Positive
When looking to invest in real estate, population growth and GDP per capita should be carefully assessed because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Slovakia, the average GDP per capita has changed by 5.9% over the last 5 years. It's a solid number.
This means that, if you purchase a comfortable apartment in Bratislava and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is likely to go up in Slovak cities, such as Bratislava, Košice, or Žilina in 2024.
Rental yields are not crazy in Slovakia
Neutral
Shifting gears, let's assess the rental yield.
It's the annual rental income of a property divided by its price. For example, if a property in Slovakia is purchased for €200,000 and generates €8,000 in annual rental income, the rental yield would be 4%.
According to Numbeo, rental properties in Slovakia offer gross rental yields ranging from 2.4% and 5.1%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Slovakia.
It means that the income potential from a real estate investment is relatively moderate.
Everything you need to know is included in our Slovakia Property Pack
In Slovakia, anticipate strong inflation
Positive
Inflation is when the amount of money you need to buy things keeps increasing.
It's when your usual bowl of bryndzové halušky costs 7 euros instead of 6 euros a couple of years ago.
If you're considering investing in a property, high inflation can offer you several advantages:
- Property values have a tendency to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying your portfolio with real estate provides stability during periods of inflation.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
In accordance with IMF projections, over the next 5 years, Slovakia will have an inflation rate of 16.3%, which gives us an average yearly increase of 3.3%.
It means that Slovakia is anticipated to encounter inflation, making it a potentially opportune time to buy property. If the property's value increases over time, you can sell it at a higher price and make a profit.
Is it a good time to buy real estate in Slovakia then?
Let's wrap things up!
2024 presents a promising opportunity for property investment in Slovakia, supported by a range of favorable signals that indicate a conducive environment for real estate endeavors. The ongoing stability of Slovakia as a country provides a secure foundation for property investment, assuring investors of a reliable and predictable investment environment.
The projection of strong economic growth in Slovakia adds to the appeal of property investment. Robust growth often correlates with increased demand for housing and properties, potentially leading to capital appreciation over time.
The surge in property prices with accelerating growth underscores the potential for value appreciation in the real estate market. This indicates a positive trend in property values, creating opportunities for investors to benefit from potential gains.
With the population's improving financial status and strong anticipated inflation, the demand for housing and real estate in Slovakia is likely to rise. Additionally, real estate can serve as a hedge against inflation, preserving and potentially increasing an investor's purchasing power.
While neutral signals such as rental yields are moderate and stable, the combination of Slovakia's stability, growth potential, property price surge, population prosperity, and inflation creates a favorable environment for property investment in 2024, despite the skepticism among Slovak business owners.
We hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Slovakia.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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