Slovak Holiday - Homes Still a Smart Buy

Gajdošíková’s company helps British and Irish investors enter Central Europe’s fast-growing property markets. One in three Slovak investment properties the company sells is located in a holiday resort. The main areas of interest in terms of holiday regions are the High and Low Tatras and the Liptov region; if skiing is a concern, then Jasná is a favourite among buyers.

What should a foreign investor consider before purchasing a holiday home in Slovakia?
„First of all, it’s important to distinguish between holiday homes and investment properties. A holiday home in its original sense would be purchased for the buyer’s own use as a second home for family and friends. While there is interest among British and Irish buyers in properties in Slovakia, it is almost never related to pure holiday homes, but rather to investment properties that may be in holiday areas. Therefore, most investors compare city properties in Bratislava, for example, with properties in tourist regions such as the Tatras or Liptov, and decide where to buy based on price, expected rental returns, infrastructure and access, and the availability of services such as letting and property management, etc.“

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What kind of holiday properties are most in demand?
"Apartments – especially in new developments – are the most popular type of investment property, no matter whether they are located in cities or ski regions. Thanks to their ease of use and maintenance as well as their lower prices, apartments are far more in demand with investor buyers than cottages and houses. Due to restrictions on construction in most Slovak mountain regions and resorts, there is little suitable product, and the little that is available is nowadays often comparable in price to some French or Austrian resorts, so it’s not always attractive to foreign investors. Those looking to buy in emerging markets such as Central and Eastern Europe expect low prices and hence upside potential, and they don’t see value when prices reach a level comparable to the more established destinations."

What lures foreign buyers to invest in Slovak ski resorts?
"Due to the investment objectives of a large majority of British and Irish buyers, the main attractions are still the comparatively low prices and the strong upside potential, as Slovak resorts are expected to get more developed and better known, and consequently to attract better quality visitors, resulting in potentially higher rental returns and capital growth. Of course, as not all investors are buying with purely investment goals in mind, some of them are planning to spend a few weeks in their holiday-investment home, while they also aim to let the properties for as much time of the year as possible. These buyers naturally also consider personal preferences and likes when deciding on a particular area. Slovak resorts in such cases appeal more to those looking for a family ski holiday rather than demanding slopes for serious skiers."

What options do expats have in letting holiday or investment homes?
"Buyers purchasing properties in Slovakia’s ski resorts generally need to use a Slovak travel agency to obtain bookings from visitors. The lack of essential services such as rental and property management is one of the main obstacles for investors looking for properties suitable for holiday lettings. These services – especially management – are still rare even in the cities, and almost unheard of in Slovak holiday regions. Investors will naturally not purchase unless such a service is available. However, the developers of some of the new projects in ski resorts are trying to offer such services to investors. So the situation, at least for new projects, is slowly changing. It’s important to understand that rental and management services in holiday regions are very new, which can sometimes lead to frustrations for a foreign investor."

Even though ski resorts in Bulgaria are at a lower level than those in Slovakia, why are holiday properties in Bulgarian ski resorts still more popular than in Slovakia? What are the Bulgarians doing differently?
"First, British and Irish buyers purchasing in Bulgaria are almost exclusively investors or speculators, not holiday home buyers as such. This means they are buying in the hope of profiting from the potential capital gains, rather than for their own vacation use of the property. Bulgaria is certainly quite a phenomenon when it comes to new property “hotspots”. It is not based on any particularly strong economic or property market fundamentals, but is more the result of clever marketing, including by British TV and press, who are always looking for the next big thing. Bulgarian developers were of course smart and quick to jump on the bandwagon, which is why we’ve seen thousands of new flats in Bulgarian sea and ski resorts built with the aim to be sold to British and Irish buyers almost exclusively. That doesn’t come without its problems, of course, the most obvious of which is the lack of an exit strategy for the foreign buyers. Due to the absence of a local Bulgarian sale and resale market, the investors will find it hard to exit the market in the short to medium term. Therefore, much of the perceived capital gains may be just paper profits rather than real returns."

What are Slovakia’s advantages over Bulgaria?
"The biggest advantage of buying a property in Slovakia is the strength of the local market. Virtually any property, whether in cities or tourist resorts, can be sold to a local buyer, which provides a clear exit strategy for the foreign investor. It also means that while the prices of Slovak properties may be slightly higher than in Bulgarian tourist resorts, they are based on local demand and supply, and have not been artificially inflated by thousands of foreign buyers, as in the case of Bulgaria. In terms of rental, while the holiday rental market is not yet very developed in either country, the supply of properties offered for letting, and hence the competition, is infinitely higher in Bulgarian resorts, to the disadvantage of the investor landlords. And of course, the stellar performance of the Slovak economy and the consequently higher purchasing power of the local population are very strong fundamentals working to the benefit of those investing in Slovakia."

What do apartments in holiday areas in Slovakia and Bulgaria cost?
"While much depends on the area, the standard and the facilities, prices in Bulgarian ski and coastal resorts typically range from €1,000 – €1,500/m2. Meanwhile, in Slovak ski regions, newly built flats are being offered at €1,400 – €2,400/m2 (including VAT)."

Which country is the most likely to experience a real estate boom in holiday homes?
"The next hotspot is always very difficult to predict. Central and Eastern Europe has seen a huge rise in popularity in the last few years as the countries joined the EU. However, these destinations have mostly been of interest to investors predominantly looking for city buy-to-let apartments. Increasingly, holiday home buyers and investors are looking further afield as air tickets become more affordable even for long distance destinations."

Source: The Slovak Spectator
By Lívia Tóthová
Photo: Lívia Tóthová, Fotolia

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