CEDES Conference Slovakia 2023 - Residential Round-up
Slovakia is experiencing one of the worst first quarters in the last 15 years, with increasing mortgage rates and high property prices causing apartment sales in new residential developments to plummet. David Martan, Managing Director of Svoboda & Williams Slovakia, and moderator of the Residential Panel held at CEDES 2023 asked his fellow panelists about the state of the real estate market and strategies to overcome these difficulties.
The experts taking part in the panel were generally optimistic and inclined to see the challenges as opportunities to come up with new ideas and products. Filip Žoldak, Partner & Co-Founder of HERRYS, stated that, despite the low volume of sales, there were still projects selling: “There is still a product that is placeable in the market. So, there is still a market.”
Ján Krnáč, Managing Director at CRESCO Real Estate, talked about the Mortgage Rent initiative introduced for their Slnečnice project, as a strategy to support sales. According to Ján, most developers only reduce prices by small percentages, which does not help clients to qualify for a mortgage. “What we introduced”, he said, “is a product that gives our clients a little more time. They will sign a contract with us, and they will rent the apartment for 2 years. And within the period of 2 years, they will have an option to purchase the unit for the price that is stable and fixed.” He reports that the initiative is successful, having generated hundreds of leads.
Juraj Nevolnik, Managing Director for Slovakia at Penta Real Estate, also pointed out that the new crisis is different from the previous one, in 2010: “Nowadays there is quite a low supply. The backlog is not too big. It is like 4 or maybe 5 thousand apartments in a pipeline.” He went on to clarify that his company was not inclined to give discounts or hurry to sell their outstanding stock, preferring instead to wait until the market stabilizes. Regarding the slowing down of new developments, he expressed confidence in the fact that, by 2024, there would be new construction starts.
The market in Bratislava vs. the rest of the country and other countries:
According to David Martan, Managing Director of Svoboda & Williams Slovakia, and moderator of the Residential Panel held at CEDES 2023, statistics reveal that up to a third of new projects in Bratislava didn't record a single sale in the first quarter of 2023. In this context, the moderator asked the experts invited to participate in the panel whether they intended to move their real estate investments to the rest of Slovakia or other countries.
Filip Žoldak, Partner & Co-Founder of HERRYS, stated that the other regions of the country were even more sensitive to destabilizing factors than the capital, and that his company was focusing mostly on Bratislava, with the notable exception of holiday regions, which were doing better. To this respect, he mentioned the project Elements Resort, which he reported included 32 nearly completely sold-out apartments with a price of 7,000 EUR/sqm.
As to the neighbouring countries and even Western Europe, the panelists agreed that the current situation is similarly challenging everywhere. Ján Krnáč, Managing Director at CRESCO Real Estate, said, referring to the market in the Czech Republic, that “There are no new developments or new projects that are rising. [...] And this is the same that we see in Poland and also in the Western world. It is very difficult for new developments to go ahead.”
To add another perspective to the issue, Juraj Nevolnik, Managing Director for Slovakia at Penta Real Estate, whose company is both active in Czech Republic and Slovakia, pointed out that “Prague is ahead of Bratislava, because the interest rate increase started much sooner. [...] So the situation has stabilized. People got used to the new reality. And this is what we expect to happen in Bratislava. After maybe the second wave of salary increases in 2024, they will revise their expectations and realize that 3.5 to 4 is the new normal.”
Finally, Ivan Bratko, Head of Real Estate Sales at J&T Real Estate, whose company has experience on the UK market and is reportedly also looking towards the German market, said that they “are mainly focused on Bratislava, and this will be our main target for, let's say, the coming decades.”
Full coverage of the residential panel will be available in the next issue of CIJ EUROPE.