Cheap loans and property price growth create fears of price bubble

Low-interest and easily accessible housing loans and the growing prices of flats are triggering concerns that a price bubble on the housing market may ensue, CSOB bank analyst Marek Gábriš said on Tuesday. Gábriš was speaking in response to an announcement by central bank (NBS) earlier in the day that property prices posted an annual rise of 1.1 percent overall in the fourth quarter of 2015. The prices of flats alone went up by as much as 6.4 percent. The average price of a property reached €1,232 per square meter in the last quarter of 2015. Gábriš noted that this is the highest figure in the past three years. While the prices of flats rose at the aforementioned pace, those of houses contracted by 2.7 percent on the year. "This is probably due to the overall higher prices of houses compared to those of flats, as well as to increased interest in small flats for young people and the migration of people to cities and richer regions. The availability of public transportation, public amenities and priorities of today's customers also play a role", said Gábriš. The rise in the prices of flats may attract the attention of regulatory authorities. "The availability of housing and the price growth is producing concerns about a price bubble. However, the Slovak market is growing from comparatively modest foundations, and what is typical for it is its uneven structure. The growth in employment also contributed to the revival of activity on the property market", said Gábriš. According to the analyst, the average availability of housing is now the highest ever. Property prices, while on the rise, are still some 20 percent lower than when the property boom was peaking midway through 2008. "The record low interest rates will probably continue to fuel the interest of households in addressing their housing needs", said the analyst.