SLOVENIA Trends and Developments Contributed by: Blaž Ogorevc and Miha Štravs, Šelih & partnerji, o.p., d.o.o.
Introduction Slovenia’s real estate market is, in part, entering a period of gradual stabilisation following several years characterised by strong price growth, macroeconom - ic volatility and shifts in financing conditions. While higher interest rates and inflation temporarily mod - erated transaction activity across Europe, Slovenia continues to demonstrate resilience due to its stable legal framework, strategic geographic position and relatively transparent regulatory environment. Struc - tural demand for real estate remains supported by urbanisation, tourism growth and Slovenia’s role as an important logistics gateway between Central Europe and the Adriatic region. The country’s membership in the European Union and the eurozone, and improve - ment of Slovenia’s credit ratings also contribute to investor confidence by providing a predictable mon - etary environment. On the other hand, certain sectors of the Slovenian market still lag behind more developed or larger mar - kets. If Slovenia wishes not only to continue improv - ing the indicators on which the initial assessment is based, but also at least to maintain its current position, the future should focus on substantive improvements in several aspects of state and municipal legislation and policy. Key structural challenges to be addressed across all sectors mentioned below include effective tax policy, spatial planning constraints, fragmented land ownership and the need to modernise parts of the existing building stock in line with new sustain - ability standards, to name just a few. Residential Market The residential sector continues to face structural supply constraints, particularly in Ljubljana and other major urban centres. Demand remains strong, while the pace of new housing development has not kept up with demographic trends, urbanisation and changing household structures. Residential property prices have remained relatively resilient despite fluctuations in transaction volumes over the past two years. Higher interest rates have temporarily reduced mortgage affordability, but the impact on prices has been limited due to the persis - tent shortage of housing in urban areas.
Recent market indicators show moderate growth in residential property prices, with existing apartments experiencing stronger price increases than newly constructed units. At the same time, the number of newly issued building permits has declined slightly due to rising construction costs, labour shortages in the construction sector and the complexity of permit - ting procedures. One of the structural issues affecting housing supply in many locations is the limited availability of devel - opment land in major urban areas. Municipal spatial plans often designate relatively limited areas for resi - dential development. This is not strictly true for Lju - bljana, the nation’s largest city, where several areas have been suitably zoned, but the land designated for construction typically still requires additional plan - ning procedures before development can begin. As a result, the development pipeline for new housing projects can remain constrained for extended periods. In addition, construction costs have increased signifi - cantly over the past several years, reflecting higher prices for building materials and labour shortages in the construction sector. The cost of energy plays a significant role in this respect and, while the energy crisis triggered by the Ukraine war has just stabilised, we are now facing a new uncertainty originating from the rapidly escalating Middle East conflict. These fac - tors delay development decisions and increase the financial risk associated with new projects. One Slovenia-specific factor, rooted in past practices of certain investors, further increases the development cost, specifically the financing part. Under Slovenian law, an investor may not finance the development via pre-sale of the units (only 10% deposit can be requested from end buyers), but needs to rely strongly on bank financing very early on in the project. One investor estimates that this alone can increase the end cost of the residential units by EUR300 per square metre. Housing availability has therefore become one of the most important policy topics in Slovenia’s real estate market. The Housing Fund of the Republic of Slovenia has announced several large-scale initiatives aimed at increasing the supply of rental housing across the
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