European countries located east of 15 degrees east longitude and east of the Adriatic Sea are traditionally called Eastern Europe. These include: Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Macedonia, Serbia, Montenegro, Croatia, Bosnia and Herzegovina, Slovenia, and Albania. Let's start from north to south, that is, with Poland. And let's ask foreign real estate agents the following questions:
- What is currently happening on the real estate market in your country?
- What is the reason for the price increase?
- Will the price increase continue in the near future?
Poland: growth in two leaps
Alexandra Schneider, co-owner of the real estate agency Schneider & Kindermann: “Polish real estate rose slowly in price until Poland joined the European Union. Over these three years, it increased by more than twofold, but still has not caught up with Western European prices. For example, a Warsaw apartment in a private residential complex on a landscaped area in a house built last year costs €88 thousand, the price per square meter is $1,630. It turns out even more expensive than in Berlin. Three years ago, the price per square meter in Warsaw and Poznań was €750, and in Wrocław, Gdańsk, Gdynia, and Sopot it was about €600. However, most of this increase occurred in 2004-2006, and now the growth, as throughout Europe, has slowed down somewhat.
And if in May 2005 the average price per square meter in Warsaw was already the mentioned €750, then in January 2006 it reached €1,290. In May 2006, that is, two years after joining the European Union, the price per square meter was €1,510 - about twice the original. In May 2007, a Warsaw square meter cost €1,610, increasing by only 6% over the year. The November figure is €1,630. Thus, the appreciation is within the range of natural inflation.
What was the reason for the jump last year? The accession to the European Union was not accompanied by a transition to the euro, and the Polish zloty, equal to about €0.25 or $0.33, remains in circulation to this day. To switch to the euro, it is necessary to meet the requirements of the European Central Bank. One of them is the equalization of price levels. If earlier, upon arriving in Poland, an EU citizen could exchange euros for zlotys and buy much more goods with them than at home for the same amount in euros, now the purchasing power of the currencies has almost equalized. As a result of this equalization, everything became more expensive in Poland, wages chased after prices, and then the square meter.
Now the situation has leveled out. Consumer prices are almost stagnant. For example, the Big Mac, whose index is used to compare the purchasing power of currencies, has not moved since the beginning of the year. However, in America the same Big Mac costs $3.41, and in Poland only $2.3. Therefore, when Poland switches to the euro, another jump in prices, including real estate, should be expected. True, this will happen no earlier than 2010.”
Czech Republic: stable growth
Jan Švéda, chief specialist for the Czech Republic at Silver World: “Demand for Czech real estate is significantly higher than for Polish. This is usually explained by the availability of historical properties, since, for example, Prague was practically undamaged during the war.
The price range in the Czech capital is impressive: from ?1,500 to €4,150 per square meter. The average price per square meter in Prague is considered to be €2,500. However, prices in Prague are quoted in Czech crowns - the Czech Republic will switch to the euro only in 2010.
The greatest interest for investment is in Prague itself. The nearby Prague suburbs, located 20-30 km from the Czech capital, are also attractive. In addition, the Czech Republic has good roads and few traffic jams. In the last seven years, many luxury cottages have been built in western Czech Republic, to which you can order the construction of a bathhouse-pool or sauna. And now their buyers are Bavarians and Austrians, for whom similar cottages at home cost several times more. Foreign investors are also attracted by extremely low property taxes, low utility costs, favorable climate, and clean ecology. However, a foreign individual does not have the right to purchase real estate in the Czech Republic.
Foreigners with a business visa obtained through registration of a Czech company can only purchase real estate in the name of that company. However, this does provide the opportunity to attribute all property maintenance expenses to the company and thus minimize taxes.
Unlike neighboring Poland, prices in the Czech Republic show stable growth. They also did not avoid a big jump associated with joining the European Union, but this jump was less pronounced compared to the Polish one, because Czech real estate had not experienced stagnation before.”
Slovakia: better to buy houses
Václav Pečka, a specialist at Dаkovia: “Slovakia joined the European Union at the same time as Poland and the Czech Republic. According to a study by the German Chamber of Commerce conducted in March 2004, about half of German investors consider Slovakia the best place for investment. This recommendation applies to both the banking sector and real estate.
Real estate in Bratislava, the capital of Slovakia, is significantly cheaper than in Prague. The asking price in a panel building is €1,220, in a brick building – €1,475 per m2. However, the average in Slovakia is €1,150 per square meter. The actual selling price is much lower than the initially asked price, and one should follow not the prices listed in ads, but the amounts actually paid at purchase. However, experts advise buying not so much apartments as houses. Firstly, the square meter in them is significantly lower than in apartments, and secondly, house prices are rising faster than apartment prices. For example, a cottage in the outskirts of Bratislava costs only €21,487, i.e., only €358 per m2, while an apartment of similar size costs €75-90 thousand.
The peak of real estate price growth in Slovakia, as in Poland, is still ahead. Its main stage will coincide with the transition to the euro, and Slovakia may switch to the euro earlier – in 2009.”
Hungary: prices are guided by Putin and Bush
Laszlo Csepes, an expert at BTF: “Real estate prices in Hungary lie between Czech and Slovak levels. The average price per square meter in Budapest is approximately €1,250. The growth of real estate prices in Hungary, as in Poland, has now seriously slowed down, and Hungary will have to wait the longest for the introduction of the euro. Some jump is possible after joining the Schengen area, which Hungary will enter from the new year. And when purchasing real estate in Hungary, the owner of the property and his family members receive the right to temporary residence and obtaining a residence permit in Hungary, which will allow travel without a visa to all Schengen countries.
External political factors can also influence the growth of Hungarian real estate prices, such as the change of presidents in Russia and the United States and the subsequent foreign policy course of the new administrations. In addition, the introduction of the euro in Slovakia and the associated increase in the cost of real estate there may redirect some investors to neighboring Hungary.
The price of real estate in the above-mentioned countries is significantly lower than in Western Europe, and only the eastern lands of Germany roughly correspond to them in level. But while in the former GDR the housing market is stagnating, these countries show growth, albeit varying. One thing remains indisputable – real estate in Eastern European countries is much cheaper than in our homeland, and some of our investors, by selling an extra apartment, can buy two or three Eastern European ones and then hope that their prices will someday catch up with Moscow’s.