Residential property prices are breaking records
Residential property prices are breaking records. The Office of Geodesy and Cartography of the Republic of Slovenia (GURS) issued a semi-annual report on the situation on the real estate market in November. The main conclusion: there are fewer transactions, prices are higher.
In Q1 2020 GURS has registered about 13,300 concluded contracts for the sale and purchase of real estate, the total value of which is about 900 million euros. Compared to the second half of 2019, the number of transactions has decreased by more than a quarter, and their total volume by a third. Compared to the first half of 2019, the number of transactions was also a quarter less, and their total value decreased by 37%.
“As expected, given the Covid-19 epidemic, the record value of registered transactions in 2019 was a decline in the number and especially the total value of contracts concluded in the first half of this year. The total value of the concluded transactions was even higher than in the first half of 2015, when the last price reversal took place on the Slovenian real estate market, after which the volume of real estate sales began to grow rapidly”, the statement says.
In Q1 2020, the share of residential real estate (apartments in apartment buildings and private residential buildings) in the total value of concluded transactions amounted to more than 68%, or 614 million euros of the total amount of 897 million euros of registered real estate transactions.
Due to the high demand for residential land, apartments and houses are followed by residential land with a share of 12% or 108 million euros of the recorded turnover.
In the first half of this year, we registered about 6,300 purchases and sales of residential real estate, of which housing transactions amounted to 352 million euros, or 39% (3,854 contracts), and houses – 29%, or 262 million euros (2,464 transactions) … Total transaction volume was 28% lower than in the second half of 2019 and 26% lower than in the first half of 2019.
Record of the average price for secondary housing
At the national level, in the first half of 2020, the average price for secondary housing reached a record value and for the first time exceeded 1,900 euros / m2. Compared to the second half of 2019 (€ 1,870 / m2), it was 3% higher, and compared to the first half of 2019 (€ 1,810 / m2) – by 6%. Housing prices have been statistically growing almost linearly since the first half of 2018, and this growth continued in the first half of this year, despite a 30% drop in the number of transactions.
The largest decline in the number of transactions was observed in the sale of housing on the coast.
The decline was relatively large: 25 to 35% in and around Ljubljana and slightly less in other regions where demand for housing was lower before the epidemic. The smallest drop was in the number of housing transactions in Kranj.
Apartment prices in Ljubljana are also the highest. In Ljubljana, after a relative stagnation in housing prices since the second half of 2018, the average apartment price in the secondary market for the first time in history exceeded 2,900 euros / m2. Compared to the second half of 2019, they were 3% higher, and compared to the first half of 2019, by 5%. In the vicinity of Ljubljana in the first half of 2020, prices practically did not change. The largest increase in prices was in Kranj, where the highest increase in house prices since 2018 was recorded, and the decrease in the number of transactions in the first half of this year was also the smallest. Compared to the second summer of 2019, the average apartment price was 7% higher, and compared to the first half of 2019 – by 6%.
In Maribor and Celje, the growth in housing prices in the first half of this year was similar to the growth in Ljubljana, but prices in these cities were practically equal. As in the vicinity of Ljubljana, housing prices in Novo mesto in the first half of this year remained practically unchanged after a significant increase in the second half of 2019.
Housing prices fell only on the coast
Coastal housing prices have dropped statistically in the first half of this year, mainly due to a decrease in the number of rental housing deals. In particular, the decline in demand for holiday apartments was significantly influenced by the uncertainty caused by the epidemic, rather than the demand for apartments with which buyers meet their basic housing needs. In Koper, the average price of a secondary apartment in the first half of 2020 was 8% lower than in the second half of 2019 and 7% lower than in the first half of 2019. In the coastal area without Koper, prices were 4% lower than in the second half of 2019 and 10% lower than in the first half of 2019.
Housing prices remain about the same.
Statistically, at the national level, the average house price, which was € 130,000, was 2% lower in the first half of 2020 than in the second half of 2019, and higher than in the first half of 2019 by 4%. Thus, we can not talk about any fall in prices due to the epidemic, prices for residential real estate are breaking records.
The largest drop in the volume of real estate sales took place in Ljubljana and its environs, where, before the epidemic, the demand for residential buildings was highest, and the smallest – in suburban areas in the Shtaer and Savinja regions.
However, the epidemic also had no discernible effect on housing prices in the capital. According to our estimates, house prices in Ljubljana have not changed significantly compared to the second half of 2019, while they increased by 5-10% compared to the first half of 2019.
In terms of housing prices, Ljubljana is still followed by the coast without Koper. Despite the small number of registered transactions, according to our estimates, house prices in the first half of this year on the coast were about 10% lower than in Ljubljana. The surroundings of Ljubljana, where since the first half of 2018, as in Ljubljana, there has been a constant upward trend in property prices, despite the decline in sales, remained the most active housing market in the country in the first half of this year. It is estimated that house prices in the first half of this year were on average one third lower than in Ljubljana.
Land prices rose sharply.
In the first half of 2020, land prices for construction were not affected by the epidemic. Mainly due to high prices in Ljubljana, prices for building land in general in Slovenia have grown even more than prices for residential real estate. The average price (62 € / m2) was 11% higher than in the second half of 2019 and 9% higher than in the first half of 2019. Despite the high growth in prices for land for construction, which is mainly due to high demand and insufficient supply in urban areas, prices in Slovenia, as well as prices for residential buildings, have not yet reached the 2008 record.
The average price of land in Ljubljana was 239 euros / m2, in its subs – 118, the same was in Celje, in Maribor – 63, and the lowest was in the Shtaer region (excluding Maribor and its surroundings), only 25 euros/m2.
The Covid-19 epidemic has not had a major impact on the residential real estate market.
GURS concludes that the residential property market has recovered quickly after the first wave of the epidemic. The number of concluded transactions with residential real estate, which is a defining segment of the real estate market, returned to the pre-epidemic level in July. Preliminary data shows that the number of transactions was also relatively high in August and September. Thus, the first wave of the epidemic did not significantly affect the supply and demand for housing, as well as prices for residential real estate.
Looking to the future.
Taking into account that we are in the midst of a second wave of epidemics, the key question now is how this will affect the real estate market. According to the experience of the first wave, this will largely depend on the duration of the second wave and the further development of the Covid-19 pandemic in general, as well as on measures to ensure the purchasing power and creditworthiness of individuals and legal entities, while prices for residential real estate are breaking records as been reported.
“The longer the epidemic lasts, the more likely it is that it will start to have a negative and long-term impact on effective demand for residential real estate. This will also affect the proposal. However, even in the event of a deeper real estate crisis, house prices are not expected to fall sharply, as it usually takes several years to correct supply and start falling prices and several more years to bottom out.”
