Excellent article. I'm looking forward to the next one.

By the way, are you restricting yourself to new developements in Bratislava? Have you considered the secondary market (resale)? If not - why not?

Hi Minsk,

thank you for your comments, this is appreciated!

Regarding secondary market in Bratislava, I am personally not considering this at the moment.

First of all, prices of old buidling in Bratislava (mainly old type communist buildings called panelaks) are currently very overpriced comparing to new buildings, this is the results of very high demand/lower supply for apartment in recent years in Bratislava. It is sometimes that panelak cost almost the same as new unit. This situation start to normalise now, and it seems that growth of prices for some older apartments in some worse or more distant locations of Bratislava has stopped/even slightly declined in past 3 months, while growth of prices for new buildings continues.

Generally, I do not think there will be as good capital growth for old apartments as for good quality apartments in new developments for next years to come. The only exception I would see in Old Town (pedestrian zone), where I believe price of old apartments will grow in the same pace as the price of new modern developments, because this area is very limited as such.

There is also second issue, and this is that in order to buy good quality older apartment in good location for really good price, you have to have detailed knowledge of the market and some close connections to real estate agents, which should act in your best interest, which is not common case of course..agents want to make a deal, so they can easily offer you an overpriced old apartment. People here in Slovakia tries now to get as much as possible for their units in resale, and sometimes it is really inbelievable hwo much they ask. Really good deals (when distressed seller needs to sell quickly) are rarely even offered on internet or at the windows of real estate offices, because they are almost immediately taken by people close to real estate agents, etc...you can imagine this:)

So for me, and I also think for majority of foreign investors, the best option how to get something really BMV in Bratislava, is to approach developer in very early stage of new development planning (best, but slightly more risky before building permission is granted), because this is the stage where some more nervous developers offers good value new apartments. After they sell some number of units so they satisfy criteria of their financing bank, almost without exception they increase price of remaining units overnight...but there is a short window of opportunity at the initial stage to get a good deal. But one has to approach early..if the units are already released for locals and are on internet for few months, it might be too late (and it is too late usually) to get something with really BMV price.

Hi Marek

I found your article fascinating, not least because I bought a resale property on the edge of BA I (ul 29 augusta / Mlinske Nivy) early in 2006.

I was not completely sure how the growth potential of this old property (though not panelak) would be viewed against the new build projections, so it was very interesting to me what you said.

I think the market does seem very highly priced at the moment, especially the new River Park and Eurovea blocks. State of the art maybe, but costing more than new build on the river in London? That can't be right!

I was looking out for your follow up articles on where to invest in Bratislava, but haven't seen any of these. Am I looking in the wrong place?

Many thanks again for some enlightening thoughts,

Matt

Hi Matt

Marek's follow up article, which I can tell you is excellent, will be published next week.

cheers

Hi Marek,

I don’t understand the optimistic growth figures in your May article for 2010, 2011, when, as you say, the Bratislava market will be flooded with new developments (if they complete on time), and current unit-holders will be looking to sell then after holding for the 5-yesar CGT-free period.
Don’t forget it’s quite a small city. Where will that level of demand come from? Will people be able to leave their panelaks at this rate? Will adequate numbers of outsiders be attracted to Bratislava in time?

I don’t understand the point you make about proof of Austrian income. I thought it was relatively easy to get Slovak banks in Slovakia to accept foreign income proof. They certainly do for UK income; or does this apply solely to non-Slovaks?

Thanks, Russell.

Hello Russell,

thank you for your post and I will try to explain why do I think it is so important for Bratislava that Austrian labor market will open for Slovaks in 2011.

After Slovakia joined EU in 2004, only 3 countries allowed Slovaks to freely enter their job market, and those were Britain, Ireland and Sweden. Almost half a million of people, mostly aged 25 - 35 years, left Slovakia and started to work dominantly in Britain and Ireland. In years after, almost all other EU countries opened their work market for Slovaks, and only exceptions now are Germany and Austria. Data from July 2008 shows, that currently there are around 300 - 400 thousands of Slovaks working abroad. It is impossible to say exactly, as only part of them works officially and are registered.

For country of 5 mil people, this makes around 7% of its population, and of course much bigger percentage when speaking about segment of people who are potential property buyers (younger people, people who would like to start family, etc.) It also shows that mentality of Slovaks is such, that they are able to work abroad in order to earn and save some money. Of course, not all who wanted, really left Slovakia, as only part of people here speak English. Many of those who speak only German would prefer to work in Austria or Germany, but this is not possible until 2011.

Austria, and Wien specificaly, are only few kms from Bratislava, only 50 minutes by very convenient train. Austria has locked its job market for Slovaks till 2011, at this year it has to be unlocked because EU rules does not allow another extension of this. Austria government wanted this restriction in order to protect its local work force. As for now, it is not possible for Slovaks to work in Austria as employees. There are few thousands of them who currently work there as employees, but this is a black market and of course income from those jobs can not be used for Banks for mortgage purposes, as it officially does not exists.

This situation will change in 2011. In my prognosis I guess that it will take few months for people to realise that their purchase power has increased significantly, because they can now work just few kms away from their homes, where salaries in particular jobs are 2 or even 3 times higher. We are speaking mostly about service and healthcare industry, where salaries are greatly underestimated in Slovakia and where there is a huge demand in Austra for people from those industries.

So this is the main reason why I predict high growth (20%) in property prices in Bratislava for each of years 2011 and 2012. There are not many places in Europe (do we know any other, btw?:) where we have such 2 well connected areas, where salaries in one area are low, and salaries in other area are 2 or 3 times higher comparing to first one, and artificial barrier will drop between them in time we already know exactly. This is the reason (of course among others discussed in my article) why I do think Bratislava is very good place to invest now, and in case you have already invested, to hold your unit at least till end of year 2012.

I hope this helps,
Cheers,
Marek

Thanks Marek,
That was a very thorough and helpful explanation: one that I'm delighted to receive, as I have also invested in Bratislava. Best Regards, Russell.

Russell the other issue of relevance is that the number of properties beign built in Bratislava are still predicted to be below that required to raise the number of units to the European norm.

I have always been a big fan of Bratislava and have 7 units there and I still think it's got a great future as an investment location. However, I'd be really interested to know hwo many people willbe investing in the new PS offering there in the current climate.
Huw