Property price development in Europe in Slovakia, Czech Republic in 1Q 2024
Investing in real estate is a popular strategy to ensure stable income and appreciation of assets. However, in the context of the current economic conditions in Slovakia, more and more investors are considering moving their investments abroad. The reasons are multiple and stem mainly from the growing burden on Slovak households and the already announced changes in tax policy that Slovakia expects to introduce in 2025.
Diversification of investment portfolio
Diversification is a key principle of any successful investment strategy. By investing in real estate outside Slovakia, you can reduce your risks associated with one economy or market. For example, if the Slovak economy were to undergo further shocks (such as further energy price or tax increases), your investments abroad can offset these losses.
In contrast to the uncertain situation in Slovakia, many foreign markets offer more stable and predictable conditions for property investment and, according to the latest published data (Eurostat 07/2024), Eastern Europe has seen significant growth in property prices in recent years.
Let’s take a look at how markets in Europe have fared. We will look at the countries Bulgaria, Croatia and Spain in comparison to Slovakia and the Czech Republic. Since our real estate agency focuses primarily on the real estate markets in these countries.
Bulgaria
Real estate in Bulgaria has maintained a nice steady growth for the last years. When we look at the development of real estate prices in 1Q 2024 with a comparison from the previous year, prices increased by up to 16%.
After Poland, Bulgaria has thus become the European leader in the EU-wide house price growth. There are several reasons for this, the country is expecting to join the Eurozone soon (next year 2025). High interest in buying apartments, which are still extremely cheap by European standards.
Tourism plays a key role in the property market here. Foreign investors investing in holiday homes contribute significantly to the stability of the market, especially in areas along the Black Sea. Property prices have also risen in Sofia and in the larger cities.
The current wars in Ukraine and Israel have also contributed significantly in the buying trend. Bulgaria is a member of NATO and residents of the aforementioned countries have sought a safe haven for themselves and their families within the EU. In addition, in terms of air and sea transport, Bulgaria has been in the Schengen area since this year. The country is therefore stable and safe for buying property and is seeing an annual increase in holiday makers.
Croatia
Croatia is considered one of the most attractive destinations in terms of property investment and quality of life by the sea. Every year, property prices here have seen an increase. According to sources from Eurostat in 1Q2024 compared to the previous year there was a increase of up to +9%. The country has been in the Schengen area since 2023 and has the Euro currency which is a big attraction for many holidaymakers especially from Germany.
In 2025, the real estate market in Croatia is expected to remain active again, with the main factor continuing to be the high foreign demand for holiday properties by the Adriatic Sea. Price developments will also depend on the economic situation in Europe, interest rates and potential further regulatory interventions by the government.
Although foreign demand for property remains strong, locals face difficulties in buying property and getting their own homes headed for the sea and the capital Zagreb.
It is currently announced that Croatia will introduce a Property Tax from next year 2025 (until now it has only been a Local Municipal Tax) and increase the flat levy for owners of holiday properties. The annual flat tax on rentals has so far been only €199 per bed, which is a really low tax considering the income generated from tourist rentals. New changes are announced to increase the tax according to location, ranging from 150 to 300 euros. The tax increases will again be passed on to rentals.
The country is very attractive as a second home due to the clean sea, the accessibility and built infrastructure, the historic towns and monuments, but above all the proximity to the language.
Spain
Spain is a combination of sea, sandy beaches, historic towns, good food and golf. Last but not least, it’s the pleasant climate and warm stable weather during the winter which adds to its appeal. Spain is ideal for people who want to come to warm up and enjoy the sun all year round. Average temperatures during winter are +19°C and the sun shines 300 days a year. The beaches are criss-crossed with promenades and complemented by parks and beautifully landscaped towns, something that the Balkans may be lacking.
Property prices are still very attractive and vary according to location. The Costa Blanca, with its Alicante airport, has slightly lower property prices than the Costa del Sol, with its Malaga airport and proximity to Gibraltar and Africa.
Property prices depend on location, type of property, amenities and proximity to the sea, but we can lightly say that they are something between Bulgaria and Croatia. You’ll especially love Spain if you like the long sandy beaches and the many restaurants and bars that line them.
Spain has become a very attractive destination for retired people who find living by the sea a cheaper option than at home. Good health care, climate and sunshine also do their bit for the psyche and health. Most of the day is spent outdoors.
Real estate prices here have been rising steadily in 1Q 2024 seeing a +6.4% rise on the previous year. Properties in golf resorts and by the coast are an attractive investment sought after for rentals. Thus, a second home has also been created for many Europeans.
Slovakia:
It must be noted that the country has seen the fourth highest fall in property prices across the EU.According to Eurostat data, property prices fell by -3% in 1Q 2024 compared to the previous year.
According to the NBS, an even more robust fall in prices was recorded during 2023, when property prices fell by around 6% year-on-year compared to 2022.
There are several reasons for this, the biggest of which can be considered to be a combination of rising interest rates and falling real wages. The volume of new home loans was down by around a third in mid-2023 compared to the average of previous years. However, compared to the last peak of the property boom in the summer of 2022, the fall in the number of new mortgages was as much as -50% lower. Housing affordability in Slovakia has deteriorated markedly, demand for property has cooled and as a result average house prices in the Slovak Republic have been around 14% lower compared to their previous peak in the summer of 2022.
The outlook for the future is uncertain. Inflation is expected to reach more than five per cent next year in 2025, which is alarming. This increase will be driven not only by tax increases but also by rising energy prices. Slovakia is already one of the EU countries where households spend the largest share of their expenditure on housing, including fuel prices. This share exceeds 30% and is expected to grow further in the coming years. Investors will thus face higher property maintenance and operating costs, which again reduces their profitability. Moreover, these costs will logically be reflected in rental prices.
Another negative impact not only on Slovakia but also on other European countries and certain locations will be the development of the demographic trend of the population in the EU. Slovakia is facing a significant demographic trend, which is an ageing population. Forecasts show that the number of people of retirement age will grow in the coming decades, while the working-age population, who preferentially buy real estate, will decline.
Czech Republic
Compared to Slovakia, the Czech Republic has fared slightly better, but property prices here have also experienced a turbulent period in recent years. According to Eurostat data, property prices in 1Q 2024 rose slightly by 1.2% compared to last year.
As in Slovakia, the Czech Republic has also seen an overall slowdown in the real estate market. After a period of pandemic boom, when property prices rose sharply, there has been a significant slowdown in the following years. This trend has been influenced by several factors, such as rising interest rates, inflation, but also the slowdown in the overall economy.
The year 2024 brought a slight recovery in the real estate market, although the market has not yet returned to pre-pandemic levels. The economic situation began to stabilize, inflation declined, and the CNB gradually lowered interest rates, which slightly improved access to housing finance.
In contrast to the decline in the previous year, house prices started to rise again in 1Q 2024, albeit at a slow pace. This growth was most pronounced in Prague and other large cities, where demand is still high, especially from foreign investors. There is also a huge demand for short- and long-term rentals from students, foreign tourists or migrants. Many people of working age are looking for other housing alternatives, such as rental housing.
The development and future outlook shows that, similarly to Slovakia, the Czech Republic is experiencing demographic changes and an ageing population. In the coming years, the real estate market is expected to continue its slow growth, especially in the larger cities, but it will depend on the development of the economy, inflation and interest rates.
Word in conclusion
Investing in real estate in our country is becoming less attractive due to increasing tax burden, rising energy prices, inflation.
On the contrary, foreign markets currently offer stability, lower tax burden and opportunities for better investment appreciation. Therefore, if you are considering investing in real estate, it is worth paying attention to opportunities outside Slovakia and the Czech Republic and find your own little piece of paradise that will improve your quality of life.
*Greece has not been processed as it does not provide this data to Eurostat
Source:
https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-05072024-bp
