To a lesser extent, it was also the economic situation throughout Europe, or the lack of first-class real estate and development projects.
From the KPMG Property Lending Barometer survey, in which 48 banks from 10 Central and Eastern European countries, including Slovakia, expressed their views, there is nevertheless cautious optimism regarding the future of the real estate market and its financing.
Better return thanks to investments
The year 2023 is expected to be the weakest in terms of the total volume of investments since 2009, both in Slovakia and in the entire region of Central and Eastern Europe.
As a result of high interest rates, alternative investments to real estate yielded a better return.
"The Slovak real estate market is currently in a period whose trajectory is influenced by several factors. In this evolving environment, banks focus more intensively on the quality of projects, thoroughly research the experience of developers and prioritize established relationships," said Michal Maxim, partner for the financial services sector at KPMG in Slovakia.
No significant changes in portfolios
Commercial real estate financing is still important for banks, and most respondents do not expect any significant changes in their loan portfolios, other than slower growth.
Many will soon face having to refinance a substantial portion of their portfolios over the next two years.
In the segment of real estate loans due soon, on average 17 percent of them are due within 12 months and 32 percent within two years.
Loans made before the pandemic, when real estate transactions were at an all-time high, are partly responsible for the high volume of loans coming due in the next two years.
Loans and their problems
Despite the significant increase in interest costs and the overall negative economic development, the interviewed bankers did not notice a significant increase in problem loans. However, the number of loans with minor problems increased.
“Equity requirements are expected to tighten, reflecting a more cautious approach to lending. Overall, the Slovak real estate market is adapting to the changing economic situation, focusing on prudence and selectivity," Maxim explained.
