Top ten reasons to invest in Slovenia:
1) Slovenia has an AA stable rating from Standard and Poor and Fitch, and an Aa2 stable rating from Moody's.
2) Slovenia was the first of the 10 EU accession countries to join euro zone, having adopted the euro as its currency on 1st January 2007.
3) Slovenia joined the Schengen zone on 21st December 2007 and there are now no borders between Italy, Austria and Hungary.
4) Tourism in Slovenia has grown by 18% over the past 5 years, from 2,341,281 tourist arrivals in 2004, to 2,766,194 arrivals in 2008.
5) Slovenia's GDP will contract by 8% this year, economy is expected to return to growth in 2010.
6) Slovenia has the lowest unemployment in central eastern europe, at 5.8%.
7) Slovenia's GNI per capita in PPP was 26,910 US$ in 2008 according to the world bank.
8) Public debt is forcast to rise to over 30% of GDP this year.
9) Corporation tax will be reduced from 21% to 20% in 2010.
10) Sales tax and notary charges are paid by the seller in Slovenia.
(Sources: Unicredit Bank, World Bank, SURS)
A brief history of Slovenia's real estate market:
Socialist market -1946 - 1991
• Slovenia became part of the Federal People’s Republic of Yugoslavia
• Regime of market socialism
• All property was nationalised
• Homes were tied to jobs
• No real estate market existed
• New housing was developed by employers
Beginnings of the free market - 1991
• Slovenia became independent and adopted western style market capitalism
• Collective property was divided up
• Government gave cheap loans to tenants to buy their homes
• Home ownership today stands at 82% - a legacy of those times
• Free market slowly evolved
Legislation introduced - 2003 - 2004
• Estate agents became licensed
• Regulations relating to off-plan residential sales introduced
• Land registry became more effective
EU accession - 2004
• Slovenia joined the EU, and foreigners were entitled to acquire real estate in Slovenia for the first time
• Just over 3,000 sales to foreigners so far, mainly to British, Italian and Austrian citizens
Rising prices - 2005 to 2007
• Prices rose all over the country
• Price rises particularly apparent in Ljubljana, apartments rose from 1,750€/m2 to 2,750€/m2 - up 36% between 2005 and 2008
The bubble bursts - 2008
• Prices drop all over Slovenia, up to 15% in some areas
• Transactions of houses down 85%
• Transactions of apartments down 58%
• Thousands of empty homes waiting for buyers
• Some developers still constructing
Slovenia today
• 2m inhabitants
• 350,000 in Ljubljana
• GDP per head of 28,980 USD (purchasing power parity)
• Anecdotal evidence suggests most homeowners do not have mortgages
• Consequent high level of disposable income
• Currency = euro
The economy in Slovenia
• GDP will contract by over 4% this year
• Unemployment 5.8%
• Consumer prices up 1.1%
(All forecasts for 2009 by Unicredit Bank)
Retail in Ljubljana
• 3 main shopping centres with approx 188,000m2 of retail space
• Virtually no vacant retail space
• Key money required for space in the largest shopping centre
• Rents between 10€/m2 for large spaces in sub-prime locations to 40€/m2 for small spaces in prime locations
• 5 new retail centres planned but future is uncertain due to planning and finance difficulties
Retail in Maribor
• Slovenia’s second city with 95,000 inhabitants
• Just over 100,000m2 of retail space
• Virtually no vacant space
• Rents between 10€/m2 and 25€/m2
Brands in Slovenia
• Austrian and German brands well represented, Mueller, Palmers etc.
• Some Italian and British brands such as Marella, Top Shop, imported by distributors
• Luxury and mid-brands popular, particularly casual sporty brands such as Murphy & Nye
• Handful of Slovene brands including Mura
Office in Ljubljana
• CBD extends from town centre up Dunajska Street to the ring road
• Prime rents in the centre 20€/m2
• Prime rents on the ring 16€/m2
• Out of town rents 10 to 12€/m2
• Office accommodation is a mix of old residential converted, some socialist 70s buildings, and some newer buildings from between 1995 and 2005
• 3 new buildings at the top of the ring road nearly ready for occupancy, total 17,000m2
• Further new building of 22,000m2 under construction beside the main retail park
• Many other new buildings in planning but with finance and/or planning difficulties
• New 'Rotonda' building currently being leased is only 40% taken up despite having been marketed for over 1 year
The Slovene hotel industry
• Ljubljana at 62% occupancy
• Coast at between 40% and 60% occupancy
• Most hotels and groups are owner operated, with low profit margins
• Only one international hotel operator in Slovenia, Kempinski in Portorož, and one Austrian operator, the Austria Trend in Ljubljana
Logistics
• Two strategic routes run through Slovenia, corridors 5 and 10
• Warehouse space in Ljubljana costs between 6 and 7.5€/m2/month
• Warehouse space elsewhere costs between 5 and 6€/m2/month
• Supply and demand is in balance
Opportunities for developers
• Oversupply of residential in Ljubljana and Maribor, but still a housing shortage in smaller communities, and an opportunity to build small developments
• Great deals on hotel purchases as hotels are valued according to profitability, many can be bought for less than it would cost to build. Tourism to Slovenia steadily growing
• Shortage of quality office space but very little demand as few businesses in Slovenia are rapidly growing, and most multinationals that want to be in Slovenia are already present
• Ljubljana has 106m2 of retail space per 1,000 inhabitants, so few opportunities except for specialised retail such as Ikea, Factory outlet etc.
• Very few institutional sales so far
• Many institutional investors believe that Slovenia is too small to justify the tax and legal due diligence involved in entering a new market
• There is also a lack of understanding amongst developers of institutional investors requirements
Valuations
• Valuations in Slovenia are notoriously inaccurate and for any sizeable sale or acquisition it would be advisable to instruct an internationally qualified surveyor from a recognised firm
