Planned Real Estate Development in Ljubljana
Some of the planned real estate development in Ljubljana as presented at the Ljubljana Townhouse

As prices of real estate in Slovenia continue to rise, even in the already not-so-cheap Ljubljana, you, like Adriaan, may be wondering whether the prices have been affected by foreign investment or are they fuelled by local demand and how people can afford these places.

In Ljubljana, the rising prices have traditionally been fuelled predominantly by local (Slovenian, that is) demand as to us, Ljubljana natives, it sometimes seems as if the entire rest of the country wanted to move here.

Since joining the EU along with major Eastern European countries in May 2004, Slovenia has consistently stayed a step ahead of the other “new kids from the bloc” by being the only new entrant so far to join the Eurozone, having been admitted on 1 January 2007 and by becoming the first of the newbie countries to hold the Presidency of the European Union scheduled for the first half of 2008.

With Slovenian business traditionally firmly embedded in the international environment and for example just the export to the 25 EU members in 2006 reaching 69% of the country’s GDP with the total export gaining 17% in the first nine months of this year compared to 2006, and considering an almost equal flow in the opposite direction, an increasing number of foreign businesses are seeking facilities in the country and their employees renting or buying real estate as well.

On the other hand, growing exposure of the country in foreign media, interesting travel packages and low budget airlines are bringing in many visiting tourists who fall in love with the country and decide to purchase a dream home away from home, which considering the continuously rising prices, also makes for an attractive investment.

Potočnik's Galaxy
Potočnik’s Galaxy

Sky’s the limit in the country whose member on the EU Commission Janez Potočnik (Commissioner for Science and Research) visits an astronomical observatory and identifies and names his very own galaxy in passing. advises: If you are an ultra-cautious investor who is likely to lie awake at night sweating even if there is the teeniest-tiniest element of risk to your investment, then perhaps Slovenia is the right country for you to be putting your money into.

If you do, you will not be alone. Slovenia was tipped by Channel 4’s ‘A Place in the Sun’ programme as the 8th best place to invest over the next 10 years, with predicted increases of 250% over that period. Knight Frank are similarly bullish about Slovenia, putting it in their joint number two position along with Latvia for 2007 with a predicted growth of 17.5%.

To conclude, it is both local demand that the supply has not been able to meet the demand and foreign investments that keep the prices on the rise. Perhaps the most notable difference between the two factors being the territorial factor. Whereas local demand pushes the prices up primarily in the large city areas (close to workplaces) and the posh touristic places, foreign investors are quite likely to go for the cheap properties in regions not interesting to Slovenians as places of permanent residence due to their remoteness and absence of available jobs and other infrastructure.

This brings us to another real issue: How does one handle all the local and imported real estate fuel and finances the purchase of real estate in Slovenia?

Ideally, you have money readily available and pay in cash you pull from under the pillow (do share which Starwood hotel you usually stay at when at a European city served by a low budget airline from Ljubljana). If not, several types of loans are available.

In Slovenia, you can choose between regular loans secured by insurance, guarantor or the property itself (mortgage), financial products that combine loans with life insurance or investment in mutual funds, or so-called leasing.

The information I found on the net in English, claiming that the loan-to-value mortgages only goes as high as 50%, is out of date as the market has become far more flexible than that although thankfully not going into the sub-prime mortgage area quite as yet. So next in the series coming from this couch will be: details on the types of available financing.