Why SlovakiaThe Slovak real estate market has only just started taking off unlike many of it's neighbours whose markets have seen tremendous growth over the last few years. Prices in Slovakia have a long way to go to catch up to those of Prague, Budapest and Vienna which is less than 40 miles away.
Slovakia officially became a member of the NATO and joined the EU in spring of 2004. The Slovakian government has now proposed Euro adoption by January 1st 2009. The Slovak GDP grew by 5.5% in 2004, which is the strongest growth in Central Europe for the fourth consecutive year, and is predicted to be between 5.3–5.5% in 2005–2006 and should even exceed 6% in 2007. The government remains firmly committed to meeting the criteria for European Economic and Monetary Union entry in 2009. The general government deficit is therefore expected to decline to 3% of GDP in 2007, despite additional expenditure pressure from EU accession and pension reform, equivalent to 2.5% of GDP.
These are the main reasons that make Slovakia an excellent investment opportunity:
- Bratislava is the most under valued capital in the EU
- Slovakia is the fastest growing economy in central Europe
- Property prices are rising at approx 10% per annum
- Year round rental potential at 6-8% yield
- Flat 19% tax rate - one of the best tax regimes in the world
- Slovak currency appreciating at approximately 4% per annum
- Entry to the Eurozone in 2009
- Joined the EU in May 2004
Investment MarketThe investment market in Slovakia gathered momentum during 2005 and is now firmly in the sights of investors and developers, both institutional and private, with a number of major transactions taking place. Any investor planning to head to Slovakia to buy real estate at yields above that of other central and eastern European markets will be disappointed as returns are the same as in Budapest, Prague and Warsaw. The only significant difference is that the liquidity in the market is less than other CEE markets, which is natural as Slovakia is still being "explored" by private investors seeking smaller lot sized investments. Slovakia is similar to Hungary and Czech Republic in that the capital, Bratislava, attracts the majority of investment simply because there is a lack of modern investment grade real estate product outside the capital.
Property Acquisition by ForeignersIn Slovakia, the most common title to real estate is full ownership, which is similar to "freehold" title and entitles the owner to a full range of perpetual rights to use and enjoy real property. It is also possible to use real estate based on (i) an easement or (ii) a lease, which can be either a long-term lease or a lease for an indefinite period of time.
Unlike most other new EU countries, it is not necessary for foreigners to set up a local company to purchase property through and mortgage products for both local and foreign buyers are increasing every week. With limited exceptions concerning forest land and agriculture land in the outer areas of a municipality, foreigners may freely acquire real estate in Slovakia as of May 1, 2005.
TaxesSlovakia has one of the most favourable tax regimes in the world with both personal and corporate tax a flat 19% and no withholding tax on dividends. You can either deduct a flat 25% in respect of expenses against rental income or you can deduct depreciation, loan interest, real estate taxes, maintenance etc.
After two years, the sale of your residential apartment is CGT free and after five years the sale of other private real estate is CGT free. Donation tax and inheritance tax were eliminated as of January 1, 2004. The real estate transfer tax was eliminated as of January 1, 2005.