| August '05 Newsletter |
|
|
| Tuesday, 30 August 2005 | |
|
It has been a long and busy summer for us at Slovak Investments in Bratislava. With cold winters in Slovakia, developers must make the best use of the hot summer months to push ahead their builds, and this has given us the perfect opportunity to carry out all the groundwork on evaluating over 15 different projects across Bratislava. After our research on the available opportunities in Bratislava, we have negotiated what we believe to be the best property investment opportunity in Bratislava - by a long way. After taking into account all sides of the investment – not only price per meter or rental forecasts, but also the time to completion of build, the team behind the developer and their track record as well as the location and specifications - this development was a clear leader. We will be releasing the details of the offer early next week - we are just finalising some necessary details with the developer and gathering the comparable information for you to look through. Until then, we hope the following information will be useful towards your research into the hottest real estate market currently in Europe. Newsletter Contents: 1. The Slovakian Economy – Good News 2. The Buying Process in Slovakia 3. Mortgage Finance and Tax in Slovakia 4) Top Investment Opportunity *************************************************************** 1. The Slovakian Economy - Good News***************************************************************The overall economic sentiment over the second quarter of this year was better than that of the first quarter (which was the greatest in 6 years). With real wages up boosting the labour market, consumer confidence has increased significantly. Real wage increases and increased employment are strong drivers of the Slovakian property market, which is being heavily influenced by domestic demand for a higher standard of living. The Strengthening Slovak Koruna The strengthening of the Slovak currency stabilised by June after a good run. Commentators such as Merrill Lynch continue to see a long-term currency appreciation predicting the Koruna against the Euro at 37 by year end and 36 by year end 2006. The percentage increase in the strength of the Koruna against home currency is a crucial factor to be taken into account when calculating potential return. In Slovakia, by the time an investment return is realised, the increase in the value of the Koruna will substantially increase the return on initial foreign capital invested. Slovakia’s GDP up Year on Year Slovakia’s economy continued to perform well during the second quarter of 2005 with its real GDP growth strong at 5,1% which is still the fastest in Central Europe. Domestic demand is expected to continue to play a primary role in GDP growth this year with analysts forecasting GDP growth at 5% for the remainder of 2005. Growth over the next 3 years up to 2008 has been predicted to increase to 5,3% year on year due to the introduction of exports from KIA car manufacturer. Employment Up Total employment also rose in the second quarter of 2005 - by 1.2 percent year-on-year, with 2.073 million people now in employment. With foreign direct investment flowing into Slovakia, jobs are created, salaries rise and while this cycle is just starting in Slovakia, now is the time to invest. The rate of increase in the middle to upper class and inflow of foreign corporates is far outstripping the number of new apartments being built in Bratislava. This is in turn pushing up prices and rental returns. *************************************************************** 2. The Buying Process in Slovakia***************************************************************Buying in Slovakia as a foreigner is a relatively straightforward process if you have the right people in the right places at the right time. Below is a brief summary of the buying process in Slovakia and the associated timescales. Reservation After reservation is made, there are usually a few weeks before the contract with the developer is signed. During this time your solicitor will translate and check through your contract to make sure all is in order and the terms are good. We will put you in touch with the relevant lender or mortgage broker who will obtain a mortgage pre-approval based on your creditworthiness. Exchange of Contracts Once your solicitor is satisfied with the contract, you or your power of attorney will sign it and you will pay your deposit (normally 30%). On new build properties you will often be required to make a series of stage payments during construction. If you have arranged mortgage finance through our recommended broker, your mortgage lender will normally cover these payments for you. Completion Upon completion, the final contract is signed and the property ownership is transferred to you and registered in your name. In Slovakia, it is standard practice for new build homes to come without fitted kitchens. Slovak Investments will of course be able to recommend the right company and standard for your particular build and target rental market. *************************************************************** 3. Mortgage Finance and Tax in Slovakia***************************************************************Mortgage Finance One of the most common questions we are asked is whether we can help foreigners obtain mortgage finance for our investment deals in Slovakia. The answer is yes, and some of the key points are summarised here. Slovakian Mortgages are now readily available to foreigners and the market for lending is starting to get a little more competitive which is good news for us as investors. The buyer must prove that their net income after tax and other outgoings such as loan repayments is sufficient and rental income from the property you are financing will not normally be taken into account. Most banks are offering mortgages on a 20-30year term with rates somewhere between 4%-6.5%. Tax The Slovak Government has created one of the best environments for investment in the world. It’s new tax regime and simplified legal structure means that foreign investment is pouring into the country and the real estate market in particular is flourishing. From January 2004, real estate transfer tax on transfer of real estate without consideration (e.g. an inheritance or donation) was abolished in Slovakia. Real estate transfer tax on all other transfers of real estate was abolished from 1 January 2005. Corporation tax is a flat 19%, as is income tax, and you can either deduct a flat 25% for expenses against rental income or you can deduct depreciation, loan interest, maintenance and property taxes etc. Capital gains are taxed at 19%, however the gains from the sale of a residential apartment held for 2 years or more or other private real estate held for 5 years or more are capital gains tax exempt. With the right tax structure and advice in Slovakia, investors can potentially double their return on investment, and the government is encouraging this with more and more incentives. *************************************************************** 4) Top Investment Opportunity***************************************************************In the last three months there has clearly been a massive shift in interest from property investors and speculators in other Eastern and Central European markets to Slovakia and, in particular, Bratislava. We are increasingly receiving enquiries from investment groups and individuals who, at the start of 2005, were researching Bulgaria, The Czech Republic and Hungary (to name a few), but are now confident that Slovakia has the most potential for future property gains. We of course agree, and have researched every new development in the key locations in Bratislava, and eventually narrowed our choices down to three based on the following factors: location, capital growth potential, rental potential, developer, value, payment structures and risk. Basically, we have selected the property investment that, based on our research and knowledge, will return the most on your capital invested over the next 5 years and has the least risk associated with it. The development is backed by one of the largest banks in Slovakia and the location (Bratislava 1) can’t be beaten, with prices, based on our research, heavily discounted off market value. Rental yields will be outstanding and we are the first to bring it to the foreign market and have exclusivity in the UK. We are currently in the final stages of negotiations with the developer to get exclusive license to sell a limited number of units in his development. We have already secured from the funding bank a competitive mortgage package for our foreign investors. Our recommended solicitors are currently looking at the contracts and once we are satisfied that we have everything tied up for you, you will receive a deal alert from us offering a limited amount of units on a first come first served basis. Unfortunately until everything has been finalised, we will not be in a position to offer any further information on this deal other than what you find on the website. *************************************************************** We hope that this newsletter has been informative and look forward to speaking to investors in the coming weeks about our investment deal and to answer any questions you might have regarding property investment in Slovakia. |
| < Prev | Next > |
|---|
