STA, 9 August 2022 - There seems to be little interest among housing owners in renting out their property through a public rental housing service that the national Housing Fund set up this year to increase the number of flats available at not-for-profit rents. As a result, the fund has sub-rented out only six units so far.

The fund published a call for owners to join the scheme in February, after the housing act changes were passed in May 2021, and is open until the end of the year.

A total of 29 providers of housing from across the country responded until last Thursday - 27 individuals, and one municipality with two flats, the fund told the STA.

Until that day, the fund accepted six offers, but failed to find common ground with the other owners, mostly because they find the rent to be "too low".

The rent is set on the basis of parameters such as the size, age, state of repair, and fixtures and fittings, and capped at 1.3 of the non-profit rent for that apartment.

The flats, measuring 36-80 square metres, for which the contracts have been signed are located in various parts of the country, and were rented out at EUR 148-344 a month.

A 130-square-metre house near Ljubljana will meanwhile be rented out at EUR 396, the fund said.

Apart from owners finding the rent too low, the fund believes that to secure more flats - 200 is the target in the ongoing call, legislative changes would be needed because owners have problems obtaining the documents they need to enter the scheme.

What is also needed is "a change in mentality among owners to opt for a form of public rental that may not be as profitable as commercial rents, but offers security of tenure, proper management and predictable business relationships".

The Environment and Spatial Planning Ministry agrees the documentation (especially the occupancy permit, which older buildings often do not have) and a big gap between the expected and offered rent are a problem.

While admitting the number of units entering the scheme will be lower than the 100 planned for the first year, the ministry said that "a more detailed analysis and assessment will be carried out on the basis of the Housing Fund's annual report for 2022".

The ministry considers the response from interested parties "satisfactory" although the share of those who opt to sign the rent-out contract is "relatively low".

It will draft legislative changes "if the need for them becomes apparent", but will first meet the fund's representatives in the autumn to finds ways to encourage owners to enter the scheme.

Zoran Đukić, director of the real estate agency Stoja Trade, sees the state's decision to set up a public rental service as an excellent idea, it is just that the state did not approach it in the most appropriate manner. He believes the low interest is a result of too low a rent for housing owners and its too high taxation.

Đukić says that owners entering the public rental service scheme should have the rents obtained taxed at a lower rate than is the standard rate.

Another issue is who takes care that housing units do not get damaged when there is an intermediary between the owner and the tenant, while he also believes that owners should be better informed of the possibility of renting out through the public scheme.

STA, 8 August 2022 - Judging by the available statistical data, Slovenia's housing market is not showing signs of cooling just yet although real estate agents say prices have stopped going up mid-year. Still, pundits do not think any major drop in prices is likely over the next six months.

After a record surge last year, prices of residential properties rose by a further 4.1% in this year's first quarter on the quarter before, going up by as much as 19.6% year-on-year, the latest data from the Statistics Office shows.

Prices of existing flats went up by 5.5% quarter-on-quarter and by 19.9% year-on-year as prices of new flats dropped by 8.9% on the quarter before but were still 4.5% up compared with the first quarter of 2021.

Official data for the second quarter are not available yet but Zoran Đukić, CEO of real estate agency Stoja Trade, says selling prices are still high, in particular for well-located newish apartments with an indoor car park. The volume of transactions is level or even a bit above last year's, he has told the STA.

"The growth in residential property prices has slowed down considerably since the beginning of 2022, and has all but stopped rising starting from the second half of the year, that is we are no longer seeing prices going up at the moment," says realtor Alen Komić of ABC Nepremičnine.

In its latest property market report, released in May for 2021, the Surveying and Mapping Authority (GURS) cites preliminary data for 2022 to project a continued growth in the housing market, but also points to signs of a slow-down in the capital Ljubljana, which is seen as the trend setter for the rest of the country.

GURS attributed the record growth in 2021 to excess demand which "continues to be driven largely by low interest rates and the availability of loans and, more recently, increasingly by fears of rising inflation".

Investment in real estate as a rule provides protection against inflation, says Bojan Ivanc, chief analyst with the Chamber of Commerce and Industry (GZS). However, he also says the economic uncertainty and rising interest rates are suppressing demand for high-end properties, in particular those bought as an investment to be rented out.

Additional pressure on the prices comes from a potential change in property taxation that would reduce the return for property owners, Ivanc notes. The new government has announced it will raise tax on rental income from 15% to 25%, the rate in force prior to 2020.

Similarly, Đukić says that inflation is what in principle drives property purchases, "because that's how people protect their assets so that they don't lose value in cash".

Meanwhile, Komić believes that the tightening of credit conditions with higher interest rates and the end of fixed interest rates will have a greater impact on demand than inflation itself, although he agrees that in an inflationary environment it is preferable to invest liquidity somewhere.

Both realtors agree though that the changed conditions have not reflected on the demand in the market yet.

Ivanc believes the key factor that will affect changes in the property market will be conditions on the labour market, that is jobs and wages, and to an extent changes in interest rates. "Considering the volume of property transactions, speculative investments have not been many recently. It is thus not likely that property prices will drop significantly over the next six months," the economist says.

Rents have been going up as well, in particular on the back of a revival of holiday rentals through platforms such as Airbnb and Booking following restrictions on travel during the Covid-19 pandemic.

"Rents have increased by roughly 15 to 20 percent in 2022, especially now in the short-term rental period in and around Ljubljana city centre. There has also been an increase in Airbnb and Booking rentals, which can be seen in the smaller supply of apartments in Ljubljana city centre," says Đukić.

Komić too finds that the scope of short-time rentals has increased and that "quite a few mainly fine properties in good locations (close to the city centre) have been transferred to the short-term rental market (Airbnb, Booking, etc.), making the supply of properties even worse in terms of quantity and quality, while demand has remained virtually the same [...] All of this has, of course, led to a constant rise in rents."

The demand for residential properties had been driven by cheap loans but the cost of those has been going up since late spring and the European Central Bank has now also raised its key interest rates.

After being in the negative territory since 2015, the six-month Euribor rate went positive in early June, standing at 0.667% last Friday. In July, the newspaper Delo calculated, based on usual terms of a variable-rate mortgage loan, that those who took out a 20-year loan in early May would by now see their monthly instalment going up by around 6%.

It is not clear yet if and how the increase in the cost of mortgage loans will reflect on demand. The most recent available data from the central bank shows the volume of new mortgage loans rose substantially for the fourth straight month in May. At 11.7%, the year-on-year growth rate was one of the highest in the euro zone.

STA, 26 July 2022 - The government has approved co-financing of public rental housing from the recovery and resilience plan for a total of 34 projects as part of which a total of 1,036 housing units will be constructed. The total amount of grants is EUR 60 million.

Under the decision of the Environment and Spatial Planning Ministry, announced on Tuesday, the largest number of apartments will be constructed with the EU funds intended for post-Covid recovery in the Podravje region (404).

The number of housing units to be built in the Obalno-Kraška region is 166, followed by South-Eastern Slovenia (112), Koroška (101), Savinjska (82), Central Slovenia (80), Posavje (37), Goriška (24), Gorenjska (20) and Primorsko-Notranjska (10).

"All these apartments will be rented out to the beneficiaries through public calls for applications at a non-profit rent, with the investment making a significant contribution to facilitating access to suitable housing in Slovenia," the ministry said.

It added that investments that provide the most energy-efficient solutions had been preferred. Thus, 82% of the apartments to be built will meet the highest energy efficiency standards, ensuring low energy consumption and lower operating costs for tenants.

Projects in disadvantaged border areas were also prioritised from the aspect of the promotion of balanced regional development, the ministry said.

STA, 18 May 2022 - The Slovenian property market saw a record year in 2021 in terms of increase in prices and the number of transactions involving land for residential buildings, with the commercial property market also being revived. The Surveying and Mapping Authority (Geodetska uprava) has reported more than 37,000 transactions worth a total of EUR 2.9 billion.

The number of transactions in apartments and houses increased by about 20% last year compared to 2020 and was higher than the figure for the pre-epidemic year 2019.

The increase mainly owes to the record sales of houses, caused by the growing demand for houses outside urban centres, shows the report by the Surveying and Mapping Authority on the Slovenian property market for 2021.

Last year, the market for land for residential construction "virtually exploded", the report says, noting that compared to 2020, the number of transactions in land for houses and multi-apartment buildings was up by approximately 45%.

In the tourist centres in the Slovenian Alps, the number was up by more than 80%, in the southern suburbs of Ljubljana by about two-thirds, in Ljubljana and Celje by about 60% and in Maribor by about 45%.

According to the report, the record number of land transactions is expected to be followed by an accelerated expansion of housing construction, which has in the last three years been notable in the capital, but also in other parts of the country.

Prices of apartments in multi-apartment buildings increased by 15% last year, while prices of houses were up by 13%. Land for construction of residential buildings was meanwhile 12% more expensive than in 2020.

The growth in prices of residential property is the result of excess demand, with the supply of new buildings gradually catching up, the reports says.

The high demand for residential property for own use, and especially as an investment, is still being largely driven by low interest rates and accessibility of loans, and, more recently, by the growing fears of increased inflation.

Putting additional pressure on the property prices is the high growth of construction costs due to the global rise in energy prices and building materials due to the Covid-19 pandemic and, as of recently, the war in Ukraine.

The report notes that, considering the prices and the volume of new construction in Ljubljana, a peak of the property cycle is near, as the market supply will exceed demand that could be backed by solvency and sales will be slowing down.

A general decline in demand for residential property could also be triggered by a rise in interest rates that is expected in the near future, while a turnaround in the price trend is not expected until supply exceeds demand.

The report notes that the number of transactions with commercial property increased by approximately 30% last year, but the number was nevertheless still some 10% lower than in the pre-Covid year 2019.

A PDF of the full report, in Slovene, can be found here

STA, 4 May 2022 - The Slovenian central bank will adjust its macroprudential policy as risks to financial stability stemming from the property market are increasing. It will however give banks more discretion over who they lend money to, while requiring that they increase their capital buffer.              

From July, banks will be able to lend money to customers who are not considered creditworthy under current rules, that is customers who are left with only 76% of the gross minimum wage plus the amount for dependent family members after paying their monthly instalment.

However, banks will be able to opt for this exemption for only up to 10% of their transactions, Primož Dolenc, an adviser at Banka Slovenije, told the press on Wednesday.

Loan contracts for residential housing fully secured by a state guarantee will be exempt from the restrictions on retail lending.

This exemption also applies to loans taken under the law on the housing guarantee scheme for the young, which enters into force tomorrow.

Also from July, the recommended loan-to-value ratio for a second or any subsequent piece of property will be reduced from 80% to 70%.

Nevertheless, the current recommendation that the ratio should not exceed 80% will continue to apply to those who borrow to buy their first home.

To increase the resilience of banks to rising risks related to retail lending and developments in the housing market, banks will have to convert part of their capital they already hold voluntarily into mandatory capital from next year.

Banka Slovenije has given them some time to adjust to this, while it estimates that no bank will need a capital injection to meet the new standard.

The central bank has noted a steep rise in prices of property, which it estimates to be already overpriced, as well as a steep rise in housing loans.

Housing loans to households have increased to 9.1% since the end of 2021, and to 10.2% since February.

While the central bank has adopted these measures to limit the risks the property market could pose to the banking system, it believes the state has to step in to address the situation on the property market comprehensively.

With the softer rules to approve loans, Banka Slovenije also took into account some of the initiatives from banks, which were rather critical of some restrictions introduced in late 2019.

STA, 10 March 2022 - The opposition Left (Levica) has tabled a bill introducing a tax on empty and large houses and apartments to tackle the shortage of homes as estimates show that there are about 175,000 empty apartments around the country.

According to the party, real estate agents estimate that around 30% of all real estate transactions are purchases of real estate as an investment. "This trend is the consequence of an absence of any kind of housing policy and inappropriate taxation of real estate," the party said.

It noted that revenue from taxes on real estate and other assets were "shamefully low" in Slovenia, accounting for just 1.8% of all tax revenue, while the OECD average is 5.7%.

Estimates show that there are 175,000 empty apartments in the country, while there is demand for 30,000 public apartments that would be offered for rent, the Left said.

The new tax would be paid by real estate owners and could not be transferred to tenants or other users of the real estate.

The tax would be calculated based on the value of the real estate as determined in the mass appraisal of real estate. If the owner or their close family members permanently resided in the building, 120 square metres of residential surfaces would be deducted from the figure, meaning people living in such or smaller apartments would not pay the tax.

The bill proposes different tax rates for real estate depending on their use, with the highest rate envisaged for empty real estate.

STA, 31 December 2021 - Housing prices have risen rapidly since the market rebound in March with soaring demand underpinned by low interest rates and the availability of credit. The Surveying and Mapping Authority (GURS) says that price growth is not expected to taper off until the supply of new housing outstrips demand.

Prices of residential property have risen sharply this year and by the third quarter they were up by 12.9% at the annual level, according to Statistics Office data.

Prices of second-hand flats in multi-apartment buildings rose by around 8% in the first half of this year from the end of last year. This marks the highest six-month price growth since the 2008 housing market crisis, GURS notes in its report on the Slovenian real estate market.

The record growth was driven by the prices of flats in multi-apartment buildings in the largest cities, with the exception of Ljubljana. In Koper, Kranj, Celje and Maribor, prices thus jumped by 10%-12%.

In Ljubljana, which remains the most expensive city, prices rose by 6% in the first half of this year, reaching new record highs: the median price of a second-hand apartment on Ljubljana was EUR 3,250 per square metre.

The acceleration in residential property price growth is also reflected in the residential property price overvaluation indicators, Slovenia's central bank Banka Slovenije noted in its report on the performance of banks for December.

"Most of the overvaluation indicators already reflect a overvaluation of property prices of around 10% relative to the dynamics of other macroeconomic indicators," the central bank wrote.

Although nominal prices have already surpassed the 2008 peak, real prices are still around 10 percentage points behind.

The rapid price growth has been driven by strong demand, underpinned by low interest rates, readily available credit, and limited supply of new-build properties, according to GURS.

They added that low interest rates were encouraging both purchases of property for own use and investment purchases.

Rising prices are also increasingly affected by rising land prices, and indirectly by rising construction costs due to the global increase in transport and building material prices.

In the first half of 2021, GURS recorded 20% more sales of land for the construction of residential buildings than in the second half of last year, and 90% more than in the first half of last year.

"The accelerated growth in demand for land for the construction of residential buildings points to a strong demand for the construction of apartments for subsequent sale on the market and the construction of family houses for own use," they explained.

The number of transactions involving land for the construction of residential houses even exceeded the number of sales of residential houses themselves in the first half of the year.

The central bank also notes that household lending has picked up since the first quarter of this year with the year-on-year growth in housing loans reaching 8.1% in October.

In its macroeconomic outlook for December, the central bank notes that the gap between supply and demand was particularly pronounced, especially in larger cities. It therefore expects residential property investments to strengthen.

"We estimate that stronger demand will continue to be one of the key drivers of housing construction and development, given the buoyant labour market and favourable credit conditions," they wrote.

Similarly, GURS notes that the supply of new housing is still lagging behind demand practically everywhere in Slovenia, despite the fact that more new residential properties are coming to market.

"The growth in housing prices is not expected to stop until the supply of new housing outstrips demand, and the time required to sell new housing becomes significantly extended, or inventories of unsold housing start to build up," they said.

"So far, despite record prices, most of the newly built residential properties in the biggest cities and popular tourist destinations are still being sold before they are even built," according to GURS.

STA, 23 December 2021 - The prices of residential property increased by 2.8% in the third quarter of the year on a quarterly basis, and by 12.9% year-on-year, which is the highest price increase on an annual basis so far, the Statistics Office announced on Thursday.

After dropping in the second quarter of 2021, the prices of new residential property rose again, by 3.3%. The prices of new apartments were up by 4.3% and the prices of houses increased by 0.6% after a significant drop in the second quarter.

In the third quarter of the year, the prices of second-hand apartments and houses combined increased by an average of 2.7% on a quarterly basis. The increase was slightly higher for second-hand apartments than for second-hand houses.

At an annual level, the prices of residential property were up on average by 12.9%, which is the most since the first quarter of 2008, when the prices rose by 11.8%.

The highest growth in prices was recorded for new apartments (17.9%), followed by the prices of second-hand apartments, second-hand houses and new houses.

The total value of residential property sold in Slovenia in the third quarter of the year was EUR 378 million, which is 18% less than in the second quarter and almost equal to the total value of transactions in the same quarter in 2020.

After a notable increase in the second quarter, the number of transactions with residential property was down to 3,359, but this was still above the long-term average of 2,900 transactions.

More on this data

STA, 29 November 2021 - The newspaper Večer writes about the "vicious circle" of soaring prices of residential properties in Slovenia in Monday's commentary, finding that for many home ownership is becoming out of reach.

The piece, headlined Vicious Circle [Rast cen nepremičnin: V začaranem krogu], notes that 94% of residential real estate in Slovenia is in private ownership, and now the question is how to buy a home given the soaring prices.

"After the latest hikes in real estate prices with up to over 8,000 euro (!) per square metre in Ljubljana, it is clear an ever smaller circle of people can afford a property [...]

"We have entered a vicious real estate circle that many do not see a way out of," writes the paper, noting that only this year prices in some locations have risen by 40% compared to 2015 and used flats cost almost as much as new ones.

The paper notes that young people buying their first home or families that would like to move on getting a child are pressed hardest. "If they do not have savings or have won a lottery, buying a roof over your head is all but mission impossible today."

It is no easier renting a flat considering the lack of rental housing. "For non-understandable reasons the state is holding back construction of rental housing that could in the future at least partly mitigate the raging of property market prices."

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