Real Estate
Real Estate
Slovenian Real Estate Market
05.10.2007
The real estate market in Slovenia is stable and comparable to those of other countries. In 2006, turnover came to EUR 2.3 billion and coupled with leasing (EUR 0.6 billion) it amounted to almost EUR 2.9 billion or approximately 8.75% of gross domestic product. In the first quarter of 2007, turnover increased by 22 - 25%, which is well above the 9% average witnessed between 2000 and 2006. This shows the vitality of the market and the changing requirements of local families and investors, the private sector and foreigners, who now account for more than 5% of the sales of older, established properties, and more when it comes to newer properties.
According to the Real Estate Institute, the median price for apartments between 2000 and 2006 increased 7% annually. This figure is slightly skewed because in 2006 it increased by 12.4%. In Ljubljana, this indicator rose slightly less than 12%. However, during the nine-month period ending June 2007, this upward trend began to level out. The effects of raising the interest rate by 2 points probably accounts for this slow down. For an average apartment of 76 sq.m, the higher interest rates “ate up” between 4 to 6 sq.m. Opening the Slovenian real estate market to foreigners has not had the negative impact many thought it would have ten years ago. Quite the contrary in fact, as it now widely regarded as having been a positive step in promoting the country, particularly in regions adjacent to international airports. Cheap flights into and out of Maribor, Ljubljana, Venice, Trieste and Graz have resulted in many foreigners from London, Dublin, Brussels and Frankfurt realizing that it takes less than 4 hours to get to a village where they can spend a weekend in almost pristine natural surroundings enjoying fresh bread, excellent wine and welcoming locals.
When it comes to housing, the smaller units in Ljubljana are potentially over-priced and, while they are available for similar prices to comparable units in Portorož, it looks likely that they remain this way for the foreseeable future. Excess demand in the housing sector will only start to level out once higher interest rates start to bite and prices become unaffordable. Yet, if we exclude properties in Ljubljana and along the Slovenian coastal areas, then there really is no real estate bubble to talk about.
One peculiarity of the Slovenian market is that there is very little leasing. On one hand, this is an advantage as it means that most households have some interest in their residence and that property is not concentrated in the hands of a privileged few. On the other hand, the dispersion of ownership creates problems for property managers looking after multi-apartment buildings, who, to get anything done, have to negotiate with a large numbers of unit holders.
As far as business real estate is concerned, the market is stable and currently supply outstrips demand. Business premises sell for anywhere between EUR 1,400 and EUR 2,500 per sq.m depending on location and region. The same premises can be leased for between EUR 10 and EUR 18 per sq.m per month. Most commercial properties are now connected to the optical cable network, which provides better telecommunications access to the world.
Now that local commercial property laws have been brought into line with new EU legislation, this section of the real estate market is set to flourish. Private-public partnerships will help realize several ambitious projects in Ljubljana: the town will provide the land and investors will construct the premises and lease them out for long-term commercial use. This market is under-developed at the moment, however, the legal, accounting and tax bases have been established, which will give all interested parties the opportunity to earn some money.