SLOVENIA: An Introduction to Real Estate
Over the past few years, the real estate market in Slovenia has experienced a notable increase in prices. This can be attributed to several factors, including the overall improvement in Slovenia’s economic situation and rising demand for properties. Notably, areas such as Ljubljana and the Slovenian coast have become increasingly attractive as tourist destinations, which has boosted the demand for real estate, including from foreign investors. Additionally, financial restructuring activities within real estate conglomerates have spurred a surge in investments, particularly in warehousing and residential developments. Moreover, public investments in the real estate market have also seen an upswing.
These developments have not only impacted property prices but have also led to a noticeable increase in rental rates, with Ljubljana and the Slovenian coast standing out due to significantly higher rental costs compared to other regions in Slovenia. Furthermore, the proliferation of apartments available through platforms like Airbnb has played a role in driving up rental prices, especially in tourist hotspots like central Ljubljana, Piran, Portorož, and Bled.
However, after several years of robust growth in residential property prices and land transactions, there are now signs of a slowdown in the rate of house price increases. Several key factors are at play here, including inflation, interest rate fluctuations, alterations in tax legislation, and administrative procedures related to property acquisition.
In parallel with international trends, Slovenia’s real estate market is beginning to follow the trajectory seen in the United States in early 2022. Ongoing inflation and economic price hikes have prompted US banks to raise interest rates, thereby cooling demand in the real estate market and leading to a decrease in property prices and sales. The European Central Bank has also signalled an interest rate increase in response to sustained price increases, with prominent Slovenian banks, NLB d.d. and NOVA KBM d.d., swiftly following suit. As a result, housing loan costs have risen, and a subsequent decline in real estate investments is expected. While the property market has not yet experienced a significant drop in prices, a stagnation in price levels is becoming evident, particularly in major cities such as Ljubljana and Maribor.
In terms of price trends, Slovenia’s property market has not witnessed substantial price drops. In the first half of the current year, apartment prices in Slovenia reached an all-time high, while developable land prices peaked in the first half of 2019 and have since remained relatively stable. The highest property prices for apartments are still observed in Ljubljana, with second-hand apartments nearing EUR4,000 per square metre in 2023. Although there has been a decrease in property sales in 2023 compared to previous years, property prices have not yet declined.
The legal landscape related to real estate in Slovenia has remained stable, with no significant changes in recent years. However, three significant laws related to real estate came into effect in 2022: the Real Estate Cadastre Act, the Housing Act, and the Construction Act. While the Construction Act may not have a profound impact on the real estate market, it introduces simplifications, such as streamlined building permit procedures and the option to commence construction before a decision becomes final, reducing bureaucratic hurdles. These changes may attract more foreign investment, potentially making the Slovenian real estate market more appealing to foreign investors and increasing the workload for law firms. As of 2023, there have been no substantial changes in real estate legislation, although modifications in tax legislation were announced for the year, specifically pertaining to the taxation of rental properties, none of which have been enacted.
In summary, the Slovenian real estate market has not yet experienced the dramatic shifts seen in the US market. Consequently, there are no significant indications of plummeting property prices or a sharp drop in property purchase demand in Slovenia. However, it is likely that these trends will eventually influence the Slovenian real estate market due to the ECB’s interest rate increase. While the consequences of this rate hike remain uncertain, it is plausible that the real estate market will experience a reduction in investment activity. Nevertheless, despite the anticipated moderation in the property market in Slovenia, it is expected to remain stable, offering excellent opportunities for potential investors.