Is Bratislava overpriced?

G

Gecko

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I have been looking at Studios, 1 and 2-bed apartments in Bratislava and prices seem to be similar and higher than Prague?

Even though the rental market is not as advanced?

Any advice on this?
 
The fundamentals in the Slovakian economy are excellent. There is considerable foreign direct investment with Germany being a massive player there. Volkswagen recently rented a full apartment block in the Ruzinow district. An equally good investment option is Banska Bystrica, Slovakia's third city, at the foot of the Tatras mountains.
 
Corporate lets in Bratislava are producing yields of 5/6% with indigenous residential rentals 4/5%.
With an average weekly rent of €100 this gives an attractive yield of 4.3% on an apartment priced at €120,000. Of course location is key and rather than classing Bratislava as one entity, you should be weighing up individual districts within the city. Ruzinow is the best bet currently.
Universities are important from a rental point of view and this is an important component of the rental market in Banska Bystrica.
 
budapest said:
I've nothing against Slovakia, but is 4.3% really an attractive yield? I'd be looking for at least 6-7% in CEE.
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agreed,why would anyone go over seas for a yield of 4.3%,I cant say what int. rates are over there but if they are the same as here you will make a big loss on this deal
 
Well, for an equivalent yield in Dublin the property would cost minimum €360/400k plus you would be buying at the top of a falling market. You have to look at the purchase in totality to include capital appreciation year on year. Those who purchased in Warsaw for 70,000 3/4 years ago who are now selling at 180,000 are sitting on a considerable profit and yields were not 6/7%
 
I don't think it's a good idea to include possible capital appreciation when judging the merit of a potential investment, as it is never guaranteed and quite risky to predict. IMO, huge jumps in capital appreciation such as in Dublin a few years ago or in Warsaw in the past couple of years are a bonus to the investor, rather than a fundamental investment factor.

Rental yield should be the primary consideration and it should be enough to cover mortgage repayments. Those who purchased in Warsaw 3/4 years ago could theoretically have been getting at least a 6/7% yield at the time. At a purchase price of 180,000 euro, I find it unlikely that this is still possible.
 
Based on Wikipedia information

The Bratislava Region is the wealthiest and economically most prosperous region in Slovakia as of 2007, despite being the smallest by area and having the second smallest population of the eight Slovak regions. It accounts for about 26% of the Slovak GDP.[97] The GDP per capita (PPP), valued at €27,802 (2004), is 129.3% of the EU average and is the second-highest level (after Prague) of all regions in the new EU member states.

With typical foreign type property of new build apartments at €80k to €100k, it would seem to suggest excellent value. That is if salaries are high. Is PPP same as salary? Growth fundamentals look good. If the party is not yet over then surprisingly for me to say, but theoretically it looks to have excellent prospects.

Would seek out a value investment, rather than a glossy new builds aimed at foreigners. These always tend to be over priced.

Any more information?
 

I thought you were a CEE bear MichaelDes?!
 


It looks like a good deal financially and the prices are very reasonable. What is the finance situation? How much do they give to foreigners?

I was there a while back. Very soul-less place. Like they had a law banning people from talking loudly.
 
ringledman said:
I thought you were a CEE bear MichaelDes?!
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Yes surprising for me also, to be interested. Very puzzling? Although personally it's to far away, it does look to have good prospects for REITS or syndicates. Someone must have experience of the market to post. Or has everyone only invested in countries with the wrong fundamentals but wing and prayer promises of improvement?

I presume the Slovak Koruna is pegged now to the Euro since 2004. Is the rate
€ =35.4424 Sk1.


Love to hear more about GDP growth, government policy, age of population, etc? There has to be someone out there, cheerleader or not?
 
the banks were offering 70% LTV last time I was there a year ago, and depending on your credibility, if you sit down with the manager and are willing to invest over 300K they are flexible on loans ie. you might get 80% if you pushed them.

As Ive said before I think its a great place to invest, I was close to doing a development there on a site that already had the planning permission for 22 stories in the oldtown, now that would have been something; but unfortunately I didnt get in there in time.

I think if your looking at buying through an agent here or the UK Bratislava will certainly be overpriced, but if you went there spent a week or two making enquiries and checking out the satellite towns such as trnava I think you would have success. Theres a lot of buildings that could be refurbished if you had the time or inclination, I know thats what a friend of mine is doing in the oldtown.

I remember meeting a chap called jim passmore who had a management company there and was willing to help with refurbishments and he was also willing to organise trips for me to see some of the towns and look at potential blocks of units to refurbish. Can pass his details on if anyone is interested. Saying that I didnt do business with him so its up to you to weigh him up.

I think its obviously head and shoulders above anywhere else in CEE even poland, despite the downcast aura as Ringle mentioned. The facts are staring you in the face, perhaps waiting for too many stats will have you missing the boat...
 
The economic figures do look good for Bratislava but what is there in terms of rental potential? Some of the earlier examples of sub 5% returns are really not good enough in a developing economy. Is there a non-local rental market for high-quality properties?
 
As with all countries/cities that are attracting significant FDI there are numerous sectors within the rental market from indigenous to high end corporate lets. The Volkswagen block in Ruzinow is an example of a substantial corporate let.
I find the reaction to my earlier posts amusing as those of us in the property industry are usually castigated for overly optimistic rental projections. It's the first time I've seen an agent being accused of pessimistic projections. Just for the record, those rental projections were for illustration purposes only and dont factor in differing districts and sectors in the rental market. For example, yields in Ruzinow are substantially higher than 5%.
Lesson learned, from now I'll always quote the best case scenario
 
I wonder though, to get back to the original query, are prices already too high to allow for reasonable yields? I've found that in most cases in CEE, Irish and UK investors rush in after the real money has been made.
 
Personally, I believe that it is not just the yield that should be considered but also the capital outlay required to achieve that yield. For example, if the yield on both properties is 5%, which is the better buy, one priced at 100,000 or one priced at 350,000.
One of the best indications as to why the Irish market was inevitably going to hit the brakes, was the fact that capital values rose out of complete proportion to the rental figures they were achieving.
Surely a steady yield of 5% plus appreciating capital values is a surer bet than buying at at the top of an established market with the potential for siginificant price drops.
I would say currently it is the Slovakian property market that is low risk for investors and our own market that is high risk in the short to medium term.
 
It's impossible to say whether a 100,000 or a 350,000 property is a better investment at 5% yield. It could very easily be the latter, depending on the specifics.

In my opinion, 5% yield with good growth potential makes for a low to average quality investment. Capital appreciation can never be predicted and does not always mirror economic improvement, so I wouldn't include it in investment figures.

I agree that buying at the (estimated) top of a market is a bad idea, but low price from a Western perspective doesn't automatically mean that a particular property isn't also at a price, close to the top of the local market. If 5% is really a 'good' yield in Bratislava, then I would be concerned if prices are actually all that low after all.
 
budapest said:
In my opinion, 5% yield with good growth potential makes for a low to average quality investment. Capital appreciation can never be predicted and does not always mirror economic improvement, so I wouldn't include it in investment figures.
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Bratislava is not overpiced on paper, when average prices are less than four times salary. Within Poland and Hungary's key cities, average salaries run at a 8 to 10 times differential, which means by comparison they are overvalued. Why does rental yield not correlate to house prices. Is there over supply presently coming on stream within this relatively small market or does the government have rent controls? It seems strange.
 
Slovakia has a better tax system with a flat rate of 19%, so my assessment would be that the black economy is less rife than in Hungary or Poland, which distorts the latter two countries' figures in relation to affordability. Statistics don't always give an accurate picture in CEE. For example in Hungary, many people set up companies to avail of a low corporate tax rate and feed their incomes through them, which would probably distort the figures for 'average individual income'.

I'm also interested in why rental yield is comparatively low in Bratislava? If the economy is doing so well and there is not an oversupply of property, then why aren't rents also increasing in line with this?
 
Rents are not increasing as quickly prices for several reasons:

1) preference for home ownership (as in IRL) as opposed to renting
2) local young professionals vastly prefer to buy- mortgages are easliy available to those with good white collar jobs. Parents also usually help young couples out with deposits
3) The mortgage on a mid range 1- bed new build (NOT the luxury developments such as ballymore, river park) is not that much more that monthly rent.

Rents will probably increase in short-medium term as property becomes less affordable for middle class buyers- esp. young prof. couples.
 
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