January 27, 2010

Slovakia – Locals Buying

CE Invest is successfully selling the apartments of foreign investors to the local market in Bratislava. The demand for quality housing in the capital city has not abated and now that the prices have come down a little (20%), Slovaks have decided to buy. This phenomenon can only be observed in the segment of the residential market which has always been most attractive to buy-to-let investors, namely city-center, preferably newly-built, attractive 1-2-bedroom units.

What drives the market?

As opposed to Prague and Budapest, there is such a drastic relative scarcity of new stylish apartments in the city that as soon as one crosses the imaginary affordability threshold, people rush to buy. What may not seem so apparent from Western Europe, the contrast between old “Communist” housing and new developments built between 2004-2008 is tremendous. We are not only talking about grey pre-fab blocks of flats; the average apartments in the city, advertised as “brick buildings,” whether pre- or post-war, are avoided by new buyers. The main issues are the “old feel;” poor infrastructure; poorly lit, cold, ghastly stairwells and corridors full of the neighbor’s flower pots, laundry, and household junk; aggravated by the inefficient heating methods, leaking roofs, and aging plumbing and electric systems, which fuel constant debate among the tenants of the building. New buyers are not looking for old units and existing owners are looking for ways to sell at a reasonable price, and move out.

What is more, because of the recession, practically all new construction has stopped, so the supply is limited. The significant demand for new-built apartments has not disappeared in the wake of the credit crunch, for it was driven by a healthy economic need in this post-Communist Central European country. The boom until 2008 has certainly brought unrealistic expectations, so prices are still high, it takes a while for owners to settle for a lower price and now, seeing the increasing demand, those who can afford it, have decided to wait.

Credit is readily available in Slovakia for local residents. The banks provide mortgage loans with the same conditions as before the credit crunch. The only change is that credit is not available (yet) to non-residents. It is possible to obtain a loan with 4.3% interest while the rental yield on the apartment is 6%. There is practically no unemployment in Bratislava, as opposed to the eastern part of the country where the gap between rich and poor is widening. On top of the favorable credit situation, many Slovaks have saved up sizeable amounts of cash. Therefore all the circumstances are ripe for a steady rise in property transactions and prices in 2010.

Examples of what is for sale in Bratislava

Three Towers Development, Bratislava

Stunning views from the landmark buildings of Three Towers, proudly rising over Bratislava. The amazing stylish feel of this apartment for sale, the many sports facilities next door, attract the corporate community from the nearby office buildings and shopping-entertainment mall.

Total area: 49m2 (1-bedroom)
Balcony: 5m2
Floor: 9
East orientation

Price: 135,000 Euros with indoor parking
Furniture: 10,480 Euros (optional)

Realistic rent: 600 Euros net

Kitchen in the Three Towers Apartment Block

Fully-furnished apartment for sale in the unique Three Towers development. Spacious bright living room, quality finish, very elegantly and practically furnished.

Total area: 58,4 m2 (1-bedroom)
Balcony: 4,85 m2
Floor: 11
East orientation

Price: 143,000 Euros with indoor parking

Realistic rent: 600 Euros net

Hungary – Booming Rental Market

The recession has brought some noteworthy changes to the Hungarian buy-to-let market. First of all, because of the halt on loans and troubles back home, foreign investors have disappeared from the residential market in Budapest. Construction all over the country has stopped, creating much unemployment and bankruptcy as the wave moved down the line of subcontractors. Because of the large supply of centrally-located renovated apartments as well as new-built units, the market is beginning to move more slowly, but CE Invest has already registered a steady increase in transactions and prices as the new year started.

Since loan conditions remained strict and credit is expensive, while prices did not come down much, the average Hungarian home owner finds it more difficult to find a good deal. Therefore the rental market is booming in Budapest. Rising unemployment in the country brought all the more opportunities to the capital city (30% of the population lives in and around Budapest), so people are looking for accommodation. The limited space of the inner city districts and the lack of new developments keep prices reasonably high. It is extremely rare to find quality new-built housing with underground parking and Western European amenities in the centre.

The city employees and many foreign companies in the metropolis do not feel the “crisis” at all. The restaurants and shopping malls are crowded; the streets are swarming with tourists; there are no more fears of a currency crisis; the new government seems to have created some economic balance (the base interest rate is down to 6%); and the country is preparing for parliamentary elections due April 11. Hungarians hear stories of the effects of the recession in Britain and Ireland and they cannot believe it. There were no foreign guest workers in Hungary, there was no over-valuation of property, a much smaller percentage of the population was indebted, and credit was never as cheap as in Western Europe. Although there are a few peripheral new developments where a number of flats could not be sold, or cannot be rented; there are no empty ghost streets or ghost districts built on speculation.

CE Invest has successfully rented apartments and residential villas over the past months to the diplomat community, corporate circles, foreign students, Hungarian businessmen, and higher-income families in the city centre. The main reason for the success is intensive networking. The property management company has also doubled its portfolio in recent months by taking over the management from individual managers, lawyers, and competing management firms. Apartment owners find the results of a swift and straightforward rental process compelling. There is nothing like a regular, transparent, computerized financial report system, which gives full control to the property investor.

What is for sale in Budapest

Pleasant, quiet, already rented 2-bedroom apartment for sale in the popular Istvan Park new development in central Budapest. Furnished with style, next to a major public transport hub, sports facilities, and every city-amenity imaginable. Underground parking included.

Floor: 1
Total floor area: 59.16 m2
Balcony: 3.92 m2
Aspect: NW

Price: 85,000 EUR
Current rental fee: net 445 EUR/month
Rental yield: 6.28% p.a.

Amenities: 24-hour security.

For general enquiries on Slovakian or Hungarian properties click here to ask our experts or see the following contacts:

HUNGARY - Richard Vigh, richard@ceinvest.hu +36 30 449 1591

SLOVAKIA - Michaela Erdelyi, michaela@ceinvest.sk +421 911 251 030

Regards

Andras Patkai

ask our expert, Andras a question here