The real estate market has come to a standstill, but there is still potential for prices to decline
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- 05 Jun 2023
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In the first quarter of 2023, real estate prices in Slovakia remained stagnant compared to the previous quarter.
The downward trend in real estate sales prices, which began at the end of last year, did not continue. This can be attributed mainly to a slight increase in the prices of older properties. Existing property prices saw a quarterly increase of 0.9 percent. However, there has been a shift in the trend for new property prices, which decreased by 2.8 percent quarter-on-quarter. This information was provided by the Statistical Office of the Slovak Republic. It is worth noting that the previous year witnessed dynamic growth in the prices of new real estate.
"Real estate prices in the Slovak Republic remained stagnant at the beginning of 2023. The decline in prices for new houses and apartments from the previous quarter was counterbalanced by an increase in prices for older properties. The annual increase in prices has significantly slowed down, with two out of eight regions experiencing average price reductions compared to a year ago," highlights the Statistical Office.
This situation marks a significant deviation from the market trends observed in recent quarters. For instance, in the third quarter of 2021, new real estate prices rose by 8.1 percent compared to the previous quarter, while existing real estate prices increased by 2.6 percent. However, by the end of 2022, the prices of existing apartments had decreased.
On the other hand, new properties continued to experience growth. At the end of March this year, due to the combination of declining prices for new properties and an increase in the prices of older ones, overall housing prices stagnated.
In a year-on-year comparison, buyers paid an average of 7.6 percent more for houses and apartments. However, the rate of price growth has been steadily declining for the past three quarters. A major contributing factor to this situation has been the significant slowdown in the growth of new real estate prices. During the first quarter of 2023, new properties were sold at prices only 4.2 percent higher than a year ago, while existing properties saw an almost nine percent year-on-year increase.
When compared to the average prices of 2010, current property prices have risen by 85 percent in the long term.
The development of real estate prices in different regions of Slovakia has remained volatile at the beginning of 2023. Out of the eight regions, five experienced average price reductions in all types of real estate compared to the previous quarter, while three regions saw slight price increases.
The quarterly decline in prices was primarily influenced by new real estate in all regions, except for the Žilina Region, as well as a substantial drop in prices for older existing real estate in three regions of Slovakia. Notably, in the Bansko Bystrica Region, prices fell by over 12 percent. However, data from various institutions may not be entirely consistent. The National Bank of Slovakia reported a 3.9 percent quarter-on-quarter decrease in real estate prices in May. According to the bank, the price per square meter decreased by EUR 104 by the end of the quarter. In the first quarter of this year, residential properties had an average price of 2,556 euros per square meter.
Although real estate prices have halted their decline in the spring, market conditions suggest that further price reductions are possible. The significantly higher costs of housing loans are exerting considerable pressure on real estate prices. In April of this year, the average interest rate on new mortgages reached 3.65 percent. While mortgage prices remained stable on a monthly basis, they have increased by more than four times compared to the end of 2021. Additionally, it is not unlikely for mortgage rates to continue rising.
