Having reached its financial crisis-instigated bottoms in 2009 and 2013, the Slovenian real estate market started showing first signs of recovery in mid-2015 and has since gathered steady momentum, slowly bringing itself towards its pre-crisis levels.
A Brief Statistical Outline
According to the Surveying and Mapping Authority of the Republic of Slovenia, the first half of 2015 saw the completion of over 13,300 real estate-related transactions in a total amount topping EUR 720 million, with the residential and the commercial real estate markets seeing an increase in the number of transactions by 29% and 38%, respectively, compared to the same period in bottom-hitting 2013. According to the Statistical Office of the Republic of Slovenia, the number of transactions in the residential market peaked at 9,314, nearly reaching the all-time high of 10,119 in 2007. Trends regarding the sales of construction land have been less encouraging, with the number of transactions approaching its lowest point since 2009.
The positive trend in the residential market, however, which to a large extent is due to the repeated lowering of interest rates for mortgage loans, kept its impetus in the second half of 2015, contributing to a price increase of 5.2% for newly-built apartments. On the other hand, an aging population and decreased migration into the country has led to a significant increase in the supply of family houses available for sale, resulting in a price decrease of 4.3% compared to the previous year. The overall average price of residential real estate rose by 0.8% in 2015, representing the first increase of the kind in three years.
BAMC’s Impact on the Market
Considering the magnitude of its portfolio, further developments in the Slovenian real estate market depend to a notable extent on the future policy of the Bank Assets Management Company (“BAMC”). BAMC is a State-owned company established to facilitate the restructuring of systemic Slovenian banks, which – to stabilize them – entailed the transfer of their non-performing assets to BAMC. Consequently, BAMC holds in its portfolio real estate assets worth over EUR 80 million, along with real estate-related claims exceeding EUR 1 billion in value.
BAMC’s real estate portfolio consists of over a thousand real estate units. Since its establishment in 2013, BAMC has only managed to sell 29 real estate units for a cumulative amount of EUR 3.8 million, meaning that the largest portion of its real estate assets remains to be sold. Among these remaining assets are two large residential complexes in Ljubljana and Koper, with 227 and 215 individual residential units respectively. Both complexes are expected to be renovated prior to their sale, and once they are put on the market along with the other units, the significant increase of supply which is expected to result should put pressure on the prices of residential units across the country.
Anticipated Legislative Changes
Rigid, over-detailed, and impractical legislation in the field of new construction has often been singled out as a primary hindrance for real estate-related investment. Seeking to remedy the problem, on November 20, 2015, the Ministry for Environment and Spatial Planning of the Republic of Slovenia launched a public debate on drafts of three new legislative acts: the Spatial Management Act, the Building Code, and the Chartered Architects and Engineers Act. The drafts of these legislative acts are aimed at providing an increased flexibility to the process of spatial planning, reducing the risks usually incurred by investors, and providing a more suitable regulation of the professions pertaining to the field of real estate development (i.e., authorized architect, landscape architect, spatial planner, land surveyor, and engineer).
Furthermore, by focusing on optimizing the structure of tax burdens and hence improving economic growth, and having seen its previous attempt fail in 2014, the Ministry of Finance of the Republic of Slovenia plans to introduce a new system of real property taxation by 2017. The resulting income would fall entirely within the domain of the budgets of local municipalities and thus allow for more flexible and efficient spatial planning on the local level.
The proposed legislative amendments are expected to have a positive effect on the currently negative trend of sales of construction land and related real estate development. As to future price movements, especially in the residential market, much is thought to depend on further steps taken by BAMC and its newly appointed non-executive member of the board of directors, who has extensive experience in the real estate sector.