1. Impact of economic crisis on Slovak real estate market Koloman Ivanička, Daniela Špirková

2. Economic performance of Slovakia in 2004-2008 Fast economic growth (one of the highest in Europe) Important foreign direct investments Reduction of unemployment (also because of opening EU labor market) Growth driven by export of cars and TV sets – very opened small economy High level of economic freedom

3. Inclusion to EURO zone On January 2009 It happened during the global crises

4. Real estate market Positive economic sentiment /the feeling that construction boom will continue for long However in April 2009 the negative GDP growth Shifts in real estate demand –Less foreign direct investment –More prudential approach of the banks for mortgage provision

5. The office market Fast maturing of the market in the last year at least in the capital of Slovakia The stronger position of the occupiers in comparison with the past Stronger pressure on the developers (quality) Expectation for the reduction of rents also in buildings of class A, that is however not happening yet

6. Hotel sector and secondary housing sector The important tourist locations had suffered from substantial loss of the clients from surrounding nations because of introduction of EURO and falling values of the surrounding currencies The construction of secondary houses with annual profit margin of 4%, with the perspective of the growing value was interesting investment in 2008. Now the market is practically dead. The people during the crisis are quite cautious to invest the money.

7. Retail sector Falling value of surrounding currencies caused the influx of Slovak buyers to the surrounding countries For instance in March 2009 the retail turnover was 15% lower than in the preceding year Even in Austria many Slovaka buyers has found the competitive prices, because of very well developed and competitive retail sector caused by: –Lower rents for retail spaces –Lower marketing costs (large common German speaking marketing space) –Absence of some risk premiums –Larger variety of goods and interesting sales

8. Residential market Strong growth of the residential prices: While in 2002 the price 1700 € for m 2 was considered to be the price for the luxury apartment, in 2008 this was considered as a very good price The growth of salaries did not copy, however, the prices of the real estate – the bubble The developers were building the appartments in the luxury sectors and were neglecting other less profitable sectors Fancy margins

9. Housing prices according to the type of housing unit and family house in Slovak Republic (in EUR/m 2 )

10. How long the European earns for housing Source: ReMax, King Sturge and statistical offices individual countries

11. Banking sector Most Slovak banks are the subsidiaries of the Western European banks Tightening credit and mortgage provisions

13. Development of term deposits, provided loans and loans for housing for households in billion EUR (%)

14. Real estate intermediaries The number of such companies is now smaller because of crises Real estate intermediaries that employ professional brokers, and provide comprehensive services for the customers, have now the best position on the market advent of franchised real estate companies with better know how

15. Actions for crises elimination the end of crises is difficult to forecast. Slovakia depends on exports, and that means that first of all the importing countries must recover from the crises the recovery may depend on the government policies (there is not a large margin for government that is restrained by the necessity of the fulfillment of Maastricht criteria) the necessity to reduce the rents and prices of the real estate may help the businesses to reduce the costs and thus become more competitive, they may also enable to people to move to the areas were there is higher needs for the labor and the housing prices would act as reduced barrier for the labor mobility

16. Conclusions There are the strong indications that under the crisis the more professional real estate companies with the longer-term vision and client orientation will survive and some of the speculators will be forced to leave the market The crisis puts the pressure on the retailers, who had to work better if they want to survive. That also means that the owners of the shopping mall will have to provide more competitive rents in order to keep the shops functioning Many especially the smaller real estate intermediaries will have to leave the market The market will be probably cleaned up from speculators, and that means that the reduced offer will have the better quality.

17. Conclusions The crisis brought also the relaxation of the construction capacities After the hectic period of the construction boom, the construction sector had slowed down the movement. The developers and clients will not thus have to wait for freeing the construction capacities, and growing competition for the client will press for the higher quality of construction work. The real estate prices may help to standardize the behavior of the actors on the market. It is expected that the developers will become more responsible, and that the successful could become only the projects located in the best localities. The buyers will become better informed more demanding, and they will not buy everything.

18. Thank You for Your attention