Thinking of Buying Property? Now Is the Right Time

Date: 6 Aug 2024

Don’t keep waiting for prices to fall further. Although past trends suggested declines, there are clear signs that the trend is shifting.

Remember that Slovak real estate prices rose sharply between 2016 and 2022. That growth was driven mainly by historically low interest rates, which made mortgage credit relatively easy to obtain. Rates hovered around 1%, and high demand pushed prices higher.

That trend reversed when central banks started raising rates in 2022 to fight high inflation. Mortgage rates climbed to current levels of about 4–5% within roughly two years. Higher rates reduced the pool of buyers able to get mortgages and new lending volumes fell by as much as two thirds. Average monthly mortgage payments rose by hundreds of euros. As a result, prices declined from their 2022 peak by an average of about 15%, and many buyers began to wait for further falls.

This year, however, the decline stopped. Recent centralbank data show the mortgage market has begun to revive despite elevated rates — new mortgage volumes are up roughly 10% yearonyear.

Why the turnaround? Housing has become somewhat more affordable thanks to lower property prices and real wage growth over the last year that outpaced inflation. Put simply: people are earning more while prices are lower than before.

A broader market revival, though, will likely need mortgage rates to fall below 4%. Recent moves in financial markets gave a first signal that this may be coming.

What happened? Financial markets dropped in recent days on weaker macroeconomic data and rising recession fears, which pushed government bond yields down. Investors also began pricing in faster and more aggressive rate cuts by central banks.

What does this mean for real estate? Current developments suggest mortgage rates may already have peaked and could fall below 4% sooner than expected. With lower property prices, higher wages, and easing mortgage rates, loans will become affordable for more buyers. That should boost housing demand and put upward pressure on prices again.

So, if you’re still hesitating and planning to wait, be aware: the right time to buy property may already be arriving.