Bratislava's residential new building market continued in stagnation during the period of Q3 2023. Sales remained at the same low level as in the previous two quarters, meaning fewer than 200 apartments were sold. The supply of new apartments increased only slightly, with a similarly slow rise in price to €5,100/sqm incl. VAT. The price increase is due to the arrival of new apartments in the higher housing segment while the average price of existing projects remains unchanged, reported analysts from Bencont Investments.
Developers on the Bratislava real estate market offered a total of 3,233 flats for sale in 80 projects at the end of Q3 2023. The total supply has thus increased by less than 200 apartments in the last 3 months. Although several new projects were added, they were rather small buildings with less than 30 flats. The expansion of the offer was mainly due to existing projects that published additional flats for sale in the already developed stages.
The average unit price of the offered flats reached €5,110/sqm incl. VAT, which means an increase of 4.3% or 0.8% year-on-year compared to the previous quarter. The increase is only due to the expansion of the offer by flats in the higher segment and not to the increase in the price of the existing offer. Thus, it is still true that the prices of new buildings are stagnating for the sixth quarter in a row. There was also a slight increase in the average absolute price of new builds, by almost 7% year-on-year or 3.2% quarter-on-quarter to almost €322,000 incl. VAT. As with the unit price, it is also true that this was not a case of price rises, but an expansion of the supply of apartments in the higher segment. This is generally characterised not only by a higher unit price but also by larger flats, which pushes the average absolute price even higher. For this reason, there was also a slight increase in the average size of available flats to 62.77 sqm.
During the third quarter of 2023, 176 apartments in new buildings were sold in Bratislava. This continues the trend of weak sales, with fewer than 200 flats sold per quarter in Bratislava in the first half of 2023. At the level of the unit price of sold flats, we registered a 7% year-on-year increase to €4,937/sqm incl. VAT. The unit price of flats sold in recent quarters has been fluctuating around the level of €4,700-4,900/ sqm incl. VAT, is a consequence of lower sales, where even a small change can have a larger impact on the average. The average absolute price reached €314,000 incl. VAT, while the average size of flats sold was 64 sqm.
Rudolf Bruchánik, Chief Analyst at Bencont Investments, comments: "The real estate market in Bratislava passed another quarter without any major changes. The two main drivers of the market, demand and supply, continue to be in a state of equilibrium, resulting in a year and a half of price stagnation. The demand side is mainly constrained by difficult financing conditions, where the increase in the interest rate from 1% to 4.5% has led to an increase in the mortgage payment equivalent to a 50% increase in house prices, in the case of unchanged rates. This has discouraged many from buying property, either because of fear of high repayments or because they are being held back by the stricter conditions for obtaining a mortgage. Inflation in particular will determine the future path of interest rates. The central bank has kept rates at current levels, in particular, and does not appear to be preparing to lower them. On the other hand, at the moment it looks as if we are close to the peak, perhaps even at the peak of rates, and further increases may not occur.
In addition to rates, general sentiment is also holding back demand as people wait for a better opportunity to buy property. The secondary market has already seen a fall in prices, with those interested in new builds expecting a similar situation to occur in this market. When this sentiment will break down will depend on the general macroeconomic situation and the pent-up demand that is building in the background. The number of vacant apartments on offer stabilised very quickly after the fall in demand at just over 3,000 apartments, which is a small number given the size of Bratislava. The low supply is mainly the result of a lengthy permitting process and Bratislava's outdated zoning plan, which has significantly reduced the land suitable for residential development. The limited supply has been the main cause of the sharp rise in prices in recent years and nowadays, even with the current, significantly reduced demand, it is still so low that developers are not forced to reduce their price lists.
With the above factors influencing both demand and supply, we do not see any serious reason for change in the near term. We therefore expect the low activity in the property market to continue and result in continued price stagnation."
