“A dramatic price drop in the real estate market by 10%!” This slogan could have been popping up to you from almost everywhere. However, real estate market needs a complex eye, not only for the prices but also for their year-to-year development. If we take a look at the quarter-to-quarter price development, the drop is not so dramatic. The average price decrease in the Bratislava region was between Q4 2022 and 1Q 2023 4,3%, between 1Q and 2Q 20203 2% and between 2Q and 3Q 2023 1,4%, thus confirming that real estate market has been cooling off. The purchase-sell processes impact also the living costs, in the form of rent for management companies or energy costs. We cannot forget about a taxing responsibility. Last but not least, another factor impacting the property market is also an offer for housing financing. Also, legislative changes, interest rates changes, fees or property insurance. Below, we will look into the real estate property from the costs of housing perspective. And if it is really a purchase today more efficient for clients as it used to be before. In the end, we will create a future prognosis on how the situation could look like while considering the actual trends.
We use data from the National Bank of Slovakia (NBS) and the Statistical Office. We will compare the average values for the Bratislava region, for the purchase of a 60 m2 property with set conditions as follows: the client has the saved purchase sum of 15 000€ in cash, applies for a mortgage of 30 years and does not meet the conditions for the youth mortgage. The consumer credit for the rest of the purchase sum would last for its maximum of 8 years.
| Table overview | |||||
| 2019 | 2021 | 2022 | 20231 | 2024 | |
| The average property price for m2 in the Bratislava region2 | 2101,25 € | 2825,75 € | 3356,50 | 3095 | 3033 |
| The purchase price of an a 60 m2 apartment | 126 075,00 € | 169545,00 € | 201390,00 | 185700 | 181980 |
| The average interest rate of households with a 5-year mortgage payout3 | 1,35 % | 1,10 % | 2,19 % | 4,46 % | 5 % |
| The needed mortgage sum | 111 075,00 € | 135636,00 € | 161112,00 | 148560 | 145584 |
| The needed consumer credit sum for the rest of the mortgage sum | 0 | 18909 | 25278,00 | 22140 | 21396 |
| The mortgage payment | 375,40 € | 442,52 € | 610,93 € | 749,20 € | 781,53 € |
| The consumer credit payment4 | 0 | 261,86 € | 349,05 € | 299,76 € | 289,69 € |
| The average monthly living costs5 | 70,27 € | 71,00 € | 71,00 € | 71,00 € | 71,00 € |
| The average bank account fees6 | 5,25 € | 5,63 € | 5,64 € | 5,64 € | 5,64 € |
| The overall monthly living costs | 450,92 | 781,01 € | 1036,62 € | 1125,60 € | 1147,86 € |
We could already see the increase of the living costs in years 2019, 2021 and 2022, as the prices in the real estate market significantly increased. Last but not the least, the legislative changes also impacted the living costs. Today, the clients need more saved up money than before and they are forced to apply for the consumer credits.
In 3Q of 2022, we experienced that peak of the real estate prices. The average real estate price in the Bratislava region was according to the NBS 3451€/m2. The demand for the new properties skyrocketed during the Q2 and Q3 due to the rapid interest rate increase in mortgages, and that brought the unhealthy price increase. We experienced in Q4, that the market cooled down and the interest rates reached four times the original value.
Year 2023 finally brought the long-awaiting price drop. Logically, the buyers suppose, that the housing prices and the housing and the mortgage conditions get better, therefore many of them still wait. The NBS, in the frame of its yearly statistical data report, reported that the year-to-year price drop in Q3 was 10%. However, it is important to mention the fact, that in Q3 2022 the prices reached their maximum. The demand for properties rapidly increased during the Q2 and Q3, due to the significant increase of the interest rates, which causes the unhealthy price increase. The property prices decreased, however the living costs increased a bit. That means the property price decrease does not ensure the favorable conditions for property searching.
A quarter-to-quarter increase of the average property prices in the Bratislava region was, between 4Q 2022 and 1Q 4,1%, between 1Q and 2Q 2% and between 2Q and 3Q 1,4% thus confirming the property market has been slowing down. This information is very important, especially for the buyers. We suppose that in the following period of 12 months, if the trend would continue, at the average of 1% decrease, then in 3Q 2024 the average prices would be 3 033€/m2 in the Bratislava region.
We still expect the interest rates to rise, however not so dramatically. The reason for this is the fact that ECB have manages to stabilize the inflation and in their last report from 26.10.2023 the interest rates unchanged. Despite the ECB steps, SLSP announced the interest rates increase up to 5% p.a. As SLSPs is the mortgage market leader, we expect that the other banks will follow. This also has had an impact on smaller banks, such as Prima Banka, Unicredit or ČSOB, as they have adjusted their rates by 0,1%-0,3% p.a. Rooting from the above, we suppose that the average interest rate in 4Q 2024 would reach 5%.
Our client would like to buy an apartment in 3Q 2024, the purchase price would be 181 980€. The mortgage would be up to 145 584€, the rest of the purchase price would be 21 396 €. We suppose that the interest rates for the mortgages would remain the same as in 2023, together with the other costs. The mortgage payment would be 781,53€, and the consumer credit payment 289,69€. The overall living costs would be 1125€. Despite the property price decrease, the living costs for a single person have been slowly increasing.
The European Central Bank is determined to keep the interest rates, until the goal of 2% is met. Their goal is set to end in 2025. The interest rates have been steady in the eurozone and still reaching about 4% p.a. The reason why the interest rates in Slovakia are higher is the emission of the government bonds. Therefore, we could expect the interest rate decrease as early as 2025 and thus causing potentially the living costs decrease. However, the past experience shows that the interest rates decrease had started the property price boom.
We have wanted to point out that the question of the real estate market development is very complex, also from the living costs perspective. We have demonstrated that the living costs have been continuously rising. Of course, that the increase was expected, however despite the property price decrease, the living cost have been slowly increasing. However, it is important to remind us, that the price drop in Q3 2022 was caused by the artificial price blow, a so-called market hysteria. Despite, we have been experiencing the price decrease, still the average price/m2 in the Bratislava region reached in 3Q 2023 more than in 2021. The price decrease has not been so dramatic and the buyers should be informed that the waiting could actually bring them higher living costs.
Your ProFin Experts team! Translated by Barbora Zemko Zuzaniaková
Sources:
- Year 2023 is calculated according to the current market offer↩︎ ↩︎
- https://rb.gy/6r4usxthe arithmetic average of the property prices pre m2 in the Bratislava region between 1Q.-4. Q ↩︎ ↩︎
- https://rb.gy/zbgxub, the average interest rate in the new mortgages for a 5-year payout period ↩︎ ↩︎
- https://rb.gy/zbgxubthe average interest rate for new consumer credits for a 5-year payout period ↩︎ ↩︎
- https://datacube.statistics.sk/ ↩︎
- https://www.financnahitparada.sk/bezne-ucty, aritmetický priemer cien za základné účty, kde je cena >0 ↩︎
