Key findings:

• In 2022, 1,519 flats were sold in Bratislava's new buildings, the fewest since the financial crisis in 2008
• Sales in the first half of the year were relatively strong, with over 1,000 apartments sold. However, the second half of the year saw a significant cooling, with not even 500 flats sold in 6 months.
• The average price of vacant flats increased by 15.2%, although since the second half of the year, it has been stagnant at around €4,900/sqm including VAT.
• The supply of vacant flats increased by 33% from 2,072 to 3 209.
• Thus, after almost eight years of strong sales and double-digit price growth, activity in the residential real estate market has cooled down considerably.

According to Bencont Investments' analysis, the supply of new-build apartments in Bratislava at the end of 2022 comprised 3,209 apartments across 75 projects. Thus, for 2022, supply increased from 33% and reached above the 3,000 level for the first time since 2018. The average price of these apartments stood at €4,900/sqm, the same as in the second and third quarters of 2022. Thus, despite a year-on-year growth of 15.2%, it is evident that price growth has stalled. At the same time, however, it should be said that there has been no price reduction and new projects are also being offered at prices corresponding to the existing prices in the respective locations.

The highest year-on-year price growth occurred in the BA III district, where the price of flats increased by up to 33% to €4,826/sqm including VAT. The sharp growth was a combination of price increases in existing projects in the Rača district as well as the arrival of new, more expensive projects in the Nové Mesto district. On the contrary, prices in the BA V district grew the slowest, by only 6.3%. However, it should be said here that Petržalka has already experienced the most significant price increase in 2021 when it was ranked among the most expensive districts at the end of the year. Naturally, the highest property prices were in the BA I district, which ended 2022 with an average price of €7,445/sqm including VAT.

The average absolute price of flats in Bratislava's new-builds reached €296,000 including VAT. This is a year-on-year increase of 10%, which is the result of a combination of a 15% increase in price per square and a 5% decrease in average square footage. Apartments in the BA II-BA V districts were sold for an average of €268-286,000 including VAT. The average in the old town was almost double at €512,000, resulting in a higher unit price, but also a 20% higher area of flats. The average for Bratislava at the end of the year was 61 sqm. Compared to the end of 2021, it has gradually decreased by 5% from 64.5 sqm to 61 sqm.

As far as sales of new-builds in Bratislava are concerned, we recorded 215 apartments sold here in the last 3 months of 2022. This is an even lower number than in Q3, the lowest overall since the financial crisis in 2008. The cooling of demand due to reduced purchasing power and negative sentiment is evident for the second consecutive quarter in 2023.

Only 1,519 flats sold in the capital in 2022

A total of 1,519 flats were sold in 2022, the fewest since the financial crisis. Sales in the first half of the year were relatively strong, so over 1,000 flats disappeared from the supply. However, there was a sharp cooling in the second half and no more than 500 flats were sold in total.

The average price of sold flats was around €4,900/sqm including VAT. It caught up with the prices of vacant flats during 2022 and reached this level towards the end of the year. This shows that demand is not concentrated only on marginal and more affordable projects but on the whole spectrum and accepts the current price. However, the number of apartments sold is significantly lower, but sales have also decreased in both the lower and higher segments. Compared to 2021, sales of larger, 3-4 bedroom flats slowed the most in 2022, while 1-bedroom flats saw the lowest slowdown in demand. As a result of reduced purchasing power, the preference for smaller and therefore cheaper apartments is evident.

The significant cooling of demand for residential real estate in the last half year has occurred not only in Bratislava but also across the developed world. However, it cannot be said that this is a big surprise. The deterioration in housing affordability due to rapid price growth has been evident for the past few years, but low interest rates and economic growth have kept demand high. What was specific to 2022 was the speed at which changes in the economy occurred. The outbreak of war on the territory of Ukraine unleashed an energy crisis in Europe, with the industrial and agricultural sectors in particular suffering as a result. The rise in energy prices has added significantly to the already rampant inflation, pushing it to heights not seen in developed economies for decades. This has naturally led to the only long-term effective mechanism for taming inflation - rising interest rates.

Rudolf Bruchánik, Principal Analyst at Bencont Investments says: "Interest rates have a particularly significant impact on the real estate market, as it is a sector of the economy that is characterised by high levels of debt. A rise in interest rates from 1% to 4% will cause the same increase in the monthly payment of a 30-year mortgage as a 50% increase in the purchase price of a property, with the interest rate unchanged. Housing affordability has thus deteriorated exponentially, and people who a year ago were able to afford a mortgage on their own now need a co-borrower, for example. In addition, there is the factor of the economic outlook itself, with most people already expecting an economic recession to arrive. So they are postponing their investment in a home until they are more certain that the price will not fall after purchase. We are now at that point of waiting, and demand for housing has cooled, even on the part of those who do not have to finance most of the price with a loan."

2023: Price stagnation will continue

The residential market in 2023 will most likely follow a similar pattern to the second half of 2022. There will be, or are already, declining house prices in some locations. However, we do not think that this will be the case for new buildings in Bratislava. The region is characterised by a long-term housing shortage compared to cities such as Prague or Vienna. The fact that there is currently an increase in the supply of flats may not be a sign of an imminent fall in prices. Projects that have already been started but the construction of new projects will be delayed and the supply of new apartments will slow down. Demand will be at current low numbers for some time, but will gradually recover as the economic outlook improves, interest rates fall, inflation declines and housing affordability improves, also due to faster wage growth than house price growth. For 2023, Bencont Investments forecasts continued stagnation in new-build prices in Bratislava.