Q1 2023 on the real estate market with new buildings in Bratislava was in a similar spirit as the second half of 2022. Only 197 new-build apartments were sold on the market, which is a similar number as in the Q3 and Q4 of 2022. The price of the offered apartments continued to stagnate, being at the level of around €4900/sqm since the summer of 2022. What has changed is the inflow of new apartments into supply, which has slowed down significantly over the last quarter, leaving the supply of new-build apartments in Bratislava at the same level as at the end of 2022. At the end of Q1 2023, the supply of new-build apartments in Bratislava consisted of 3,229 vacant apartments across 78 projects. Compared to the end of 2022, the total supply increased by only 20 apartments, which is the result of one of the lowest additions of new projects. Just over 200 new apartments were added to the supply during the quarter. This is a natural progression where developers are not increasing supply with new phases to compete with their existing supply due to weak sales.

The average price of available flats was €4930/sqm including VAT. Compared to Q4 2022, the price stagnated further with a quarter-on-quarter growth of 0.25%. The year-on-year growth thus decreased to 6.4%. The price stagnation is due to weakened sales and an increase in the number of vacant apartments compared to the beginning of 2022. The cheapest new buildings were offered in the BA IV district at an average price of €4315/sqm including VAT, as most of the supply in this district consists of projects in outlying districts such as Lamač, Devínska Nová Ves and Záhorská Bystrica. On the contrary, the most expensive flats were traditionally sold in the Old Town at an average price of 7412 €/sqm. New buildings in the districts of BA II, BA III and BA V were on average offered for a similar price of around €4800-5000/sqm including VAT. The average size of flats continued to decline, falling to 60 sqm, which means a 6.9% year-on-year decrease in size. New apartments added to the supply in the last quarter had an average floor area below 60 sqm, which confirms the trend of designing smaller apartments due to the lower average absolute price. It was at the end of Q1 in the amount of €296,000 including VAT and similarly the price per square meter continued to stagnate at the same level.

During the first three months of 2023, 197 flats were sold within Bratislava's new builds, which speaks of another weak quarter when demand for flats was at minimum levels. The sharp drop in sales has been evident since the summer of 2022 and is due to a combination of high-interest rates, economic uncertainty, and negative market sentiment. The average price of apartments sold reached €4,833 per sqm, an increase of 20% year-on-year while a decrease of 1.43% quarter-on-quarter. However, due to the small sample size, the averages for sold apartments are not as consistent as those for offered apartments. The average absolute price of sold flats reached €307,000 including VAT, while the average size of sold flats was 68 sqm.

Rudolf Bruchánik, Chief Analyst at Bencont Investments: " Q1 2023 did not bring significant changes in the real estate market in Bratislava. A significantly weakened demand was to be expected, as not much has changed in the factors leading to it. Naturally, interest rates are a significant cause as they make it more expensive to finance the purchase of an apartment. They have risen even more slightly over the last quarter and new mortgages are now being granted at 4-4.5%. A 3% rise in interest rates has caused the monthly mortgage payment to rise by almost 50%, with the price of the home unchanged, which is a huge shock to buyers - especially given that such a change has occurred in the space of a year. In addition, we are still in a time of an uncertain economic environment with high inflation being the primary cause of high rates. Alongside this, prices of older homes are falling, which is leading many buyers to wait and see whether new-build prices will also fall. All of this is leading to an environment in which prospective buyers are taking much longer to consider buying a home."

On the other hand, despite weak sales, a fall in the prices of flats in new buildings is not expected. There are also a few factors that speak against this, such as significantly higher construction cost prices, which are not yet in sight to correct, a strong labour market and low loan defaults in banks, which will prevent forced sales, and a long-term shortage of flats in Bratislava, which is the fastest growing region in Slovakia. The supply of flats increased towards the end of 2022 but is currently already stagnating. This trend is yet to be confirmed in the coming months, but we think it will happen. Developers are already holding back the construction of new phases of projects as they are unable to sell out the phases already underway. In addition, it is much more difficult to meet the pre-sale criteria for bank financing, without which larger projects cannot be implemented. Finally, it should be mentioned that while nominal housing prices are stagnating, they have already fallen in real terms. This is due to double-digit inflation and the associated increase in wages. In Slovakia, it was 7.1% in 2022, while according to the NBS forecast it will reach 10.2% in 2023 and 9.2% in 2024. Housing affordability will thus improve from the point at which it is today.

From the above, we, therefore, anticipate continued stagnation in the property market in the second quarter of 2023. A modest recovery may occur in late summer, by which time, if the fight against inflation is successful, we may also see the first reductions in mortgage interest rates, which will further increase housing affordability alongside rising wages. However, we do not think that such a slight recovery will lead to an increase in housing prices and thus we expect a continuation of stagnation of new-build prices in Bratislava in 2023.