Slovakia - real estate and property investment opportunity

Why Invest In Slovakia?

Bratislava The investment climate today in the Slovak Republic is very positive. There are a number of reasons why property investors around Europe are now paying a lot of attention to the opportunities in Slovakia, and, in particular, Bratislava.

These include:

1. The country's accession to the EU on the 1st May 2004:

Membership of the EU, in itself, does not provide any guarantee of good returns on investments. However, it helps to ensure a certain level of political and economic stability and guarantees EU legal rights to all investors. Moreover, there is no restriction on the purchase by EU citizens of commercial and residential property in Slovakia. This is unlike the situation in some other new EU countries where a foreign investor has to form a company in order to buy property or has to get permission from local authorities.

2. Slovakia's strategic location at the heart of the European continent:

The Slovak Republic is bordered by four other EU countries - Austria, Czech Republic, Poland and Hungary - and by the Ukraine in the east. Bratislava is only 30 miles from Vienna, 2 hours by road/rail from Budapest and approx. 3 hours by road from Prague. There are over 350 million people living within one day's drive from Bratislava, making it a truly strategic location within the new EU. Bratislava is also very accessible. Its central location is complimented by 2 international airports within 45 minutes drive from the heart of the Old Town. Bratislava airport now has low-cost flights to London, Paris, Berlin, Dublin, and other Western European cities. In addition, Vienna airport is only a 45 minutes drive from Bratislava. Of course, the city is also serviced by the European railway network and its position on the Danube provides another means of access.

3. Fastest GDP growth rate in Central Europe:

Slovakia has outperformed all of its neighbours over the past couple of years in terms of economic growth with a GDP growth rate in excess of 8% achieved in 2006 and a similar level of growth forecast for 2007.

4. Beautiful country

Picture of Slovak town 1 The country has many scenic attractions with probably the most famous being the majestic High Tatra mountain range. There are also large areas of unspoilt woodland, five national parks, many castles, spas and hundreds of lakes. Bratislava has a beautiful Old Town centre which is mainly predestrianised and has escaped the commercialism that affects many capital cities. Yet, the tourist industry is relatively undeveloped in comparison with its neighbouring countries, Hungary and the Czech Republic. Slovakia is now beginning to advertise itself abroad as a holiday destination and, with all its natural attractions, it is expected that there will be a significant increase in the number of tourists over the next few years.

5. Pro-Investment environment

Slovakia's Central Right Government during the period 2002-2006 carried out many dramatic reforms to the taxation, labour and social systems which has made the counrty much more attractive for foreign investors. A dramatic example is Slovakia's new taxation system which applies a flat tax rate of 19% to corporations and individuals as well as eliminating any taxation on dividends. The  reform of social welfare, labour law and pension system has also been widely praised by foreign and local financial analysts. The level of improvement has been such that the World Bank nominated Slovakia as the world's top reformer in improving its investment climate during 2004. These changes position Slovakia to be a very attractive country for investment over the next few years.  The current Government has continued to follow the ecconomic policy of the previous administration and has committed to Slovakia joining the Euro in January 2009.

6. Major inward investments

All of the above advantages have contributed to the Slovak Republic attracting many major investments over the past few years. For example, due to recent investments  by car manufacturers, Slovakia is now positioned to become the highest producer of cars  per capita in the World.  Many other significant investment decisions have been confirmed and more are expected. It is reasonable to assume that the impact of all of this investment activity should be very positive for property prices.

All in all, it adds up to a positive picture for Slovakia. It is important to be aware that the country also has many problems and many people are struggling to keep up with the rapid pace of reform. However, Slovakia has travelled a long way in a very short time. The opportunity for investors lies in anticipating the direction in which the country is going rather than just observing its current economic position. It is also important to be aware of the best locations in the country for investment.

Slovak Property Market

Picture of Slovak town 2 Property prices in Bratislava experienced significant increases immediately pior to joining the EU in May,  2004, with many properties increasing in value by over 50% during this period. Some of the price increase was driven by a severe shortage of suitable property (particularly residential property) and by the new availability of mortgages. However, a part of the increase was driven by unrealistic expectations of the impact that EU accession would have on property prices. The situation stabilised immediately after EU accession and expectations from property owners and developers are now more realistic. Prices in Bratislava are still lower than in Prague or Budapest and, in our opinion, offer excellent potential for capital appreciation in the medium to long term.

There are significant variations in the prices and quality of properties on offer and, of course, it is important to be aware of local conditions which may impact the potential of a property to achieve capital appreciation.