The National Bank of Slovakia (NBS), the country’s central bank, has long been warning about the worsening affordability of housing in Slovakia. This is the result of continuously rising property prices, which real wages have failed to keep pace with.
Housing loans and building loans to Slovak households reached EUR 49.4 billion at the end of March, up from EUR 48.8 billion at the end of January. Building loans accounted for EUR 2.14 billion of the March total.
The biggest players in housing loans and building loans at the end of March were Slovenska Sporitelna with 24.50%, VUB with 18.86%, Tatra banka with 15.62%, CSOB with 14.57% and Prima banka with 10.74%.
As a result, young people in particular, and often also people on average salaries, struggle to save the 20% deposit they normally need in order to obtain a mortgage from a bank. Eurostat data show that more than 58% of people aged 18 to 34 in Slovakia live with their parents. Only Croatia ranks higher.
On the other hand, there is a group of creditworthy buyers who purchase property as an investment. They already own a home, but want to make money from real estate, and in recent years this strategy has paid off.
Since 2015, property prices have increased by 132% in nominal terms. Part of the real appreciation has been eaten up by inflation, which according to Eurostat has cumulatively reached 54%. This means an investment in Slovak property has appreciated in real terms by around 50%.
Investment flats have thus become a profitable asset. Some investors finance the purchase of a second or third property in cash, but there is also a group of clients who prefer mortgages, encouraged by several influencers on social media.
This artificially generated demand then fuels a price spiral and pushes ordinary middle-class buyers to the margins.
In an unrestricted market, this is what tends to happen. However, the NBS plans to partially correct the trend by changing the conditions under which mortgages are granted.
At present, mortgage lending limits are applied across the board and do not take into account whether the borrower is buying their first home or wants to purchase further properties as an investment. That may change. (Slovakia)