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The Real Estate Market in Slovenia:
Liberalisation and the Approach to EU Regulation

by Anton Kožar

1.Some facts and figures about the real estate market in Slovenia

In general, the real estate business in Slovenia is organised as elsewhere in Europe and the rest of the developed world. On the other hand, there are some features typical of this small country on the sunny side of the Alps.

Slovenia lies at the cross-road of traditional trade and transport routes, hal way between Vienna and Venice. In one day you could ski on slopes of the Alps and swim in the Adriatic Sea. The country is small but vastly varied landscapes shaped by influences of at least continental and Meditterinian climate.

In dry language of figures, Slovenia has 2 million inhabitants living on just over 20,000 square km with population density of 96 per one square km. The growth rate of population in the period 1991- 20002 was negative: –0.08% per year.

The average household had 2.8 members in 1999 and this figure remains unchanged. The average number of persons per dwelling (or residents) was 2.8 in 1999 and has not changed.

Table 1: Dwelling (residents) stock per 31.12.1999 in Slovenia




Urban areas

Other areas






Floor area of dwellings

1000 m2




Average floor area of dwellings





Average floor area per person





Average number of persons in a dwelling





According to the 2002 Population Census in Slovenia there are 688,000 households and 775,000dwellings. The average number of household members has decrease from 3.1 in 1991 to 2.8 in 1999-2002.
The average growth of dwellings in the period 1991 to 2002 was 1.14% annually. During the same period, the average growth of number of households was much lower – only 0.7%. We can conclude that for a long period of time (more than 11 years) the growth of dwellings was 0.4 percentage points above the growth of households.

The number of dwellings was below number of households in 1991. The situation was balanced in 1999. For example, the number of households was (706,000) very close to the number of dwellings (around 700,000). After that year the relation was the favour of dwellings.

On the other hand, there are some regions – namely Ljubljana as the capital city with surroundings where the number of households exceeds the number of dwellings. Consequently there has been a boom in real estate prices in Ljubljana.

At this point I would like to present two opposite views about the real estate market in Slovenia.

1. According to one view (mostly advocated by scholars) the number of dwellings is sufficient. Even though there are some regional gaps between actual stock of dwellings and demand, that should be managed by (i) daily migration of labour force or even by (ii) long-term migration of people.

2. The advocates of the opposite view argue that there the stock of dwellings in Slovenia does not meet the needs. Very high prices of land and thus real estate units confirm this statement. People in Slovenia are generally reluctant to move from one town to another. The solution to the problem would be to attract investors to pour more money in the market for new flats.

A step in the right direction would be to use macroeconomic policy (real estate tax policy, taxing idle land, buildings or dwellings, manage bank loans, interest subsidy, national housing savings scheme, environmental, urban and spatial policy measures) to encourage behaviour in the spirit of market economy. As it usually happen in real life, the recipe for Slovenia's future housing policy is a combination of the two opposite positions.

Economists believe that the macroeconomic policy should tailor its economic measures to make people change their behaviour (and habits). They argue that people will soon adjust one they get the right parameters. For example, they will commute from the suburbs to the city centre if they save money on taxes etc.

2. Privatisation of dwelling stock from October 1991- October 1993

The privatisation of dwellings started at the October 1991. Around one third of the dwellings, almost all 400,000 dwelling houses, had been in the private ownership at that time. Apartments, particularly in apartment houses were rarely in private hands. The stock of apartments was around 250,000 and 90% of that was under the privatisation process.

The bulk of privatisation was realised in the period of less than two year – somewhere in the October 1993. The legal basis is still valid. There are some cases that the privatisation has been going on – due to several reasons (de-nationalisation, people involved in the process went on court etc).

After the privatisation of the dwelling stock in 1991-93, the structure of ownership changed rapidly. Around 88% of all dwellings were in private ownership. That means that 88% was owner occupied and 12% was rental dwellings.[2] Those 12% dwellings was in the central government, local government and even in the corporate ownership. At the end of 20 around 84,000 apartments or around 11% of the total dwelling stock in Slovenia was state-owned. These apartments are used for social policy purposes (e.g. household pays non-profit rent).
Today the percentage of private owned dwellings in Slovenia is very high (89% in 2002) in comparison with other countries. The corresponding percentage is 58% in Portugal, in Spain and Greece 77% and those are countries that have comparable level living standard and GDP per capita as Slovenia. In Germany, for example, only 38% of flats is in private ownership while in the Netherlands only 48%. In UK and Italy they have 67% etc.

It is expected that the concentration of real estate units (particularly flats) will continue at fast pace in Slovenia.

3. Price Developments for real estate and rents 1995-2002.
3.1. Prices have risen – particularly the building land

The prices for apartments in capital city have risen since 1995. The “mark up” was particularly high in 1995-96 and again in 2000. We can put the following question. Are there signs of a price bubble in Slovenia on the real estate market? A soft answer would be: not yet – but it is likely to happen unless timely steps are taken to prevent overheating of Slovenia's real estate market.

For example, the price for an (old) apartment – is quite expensive: also by international yardstick.

The price for a new apartment in Ljubljana has risen € 1500-2200 per m2 in 2002. The average price for the central region of Slovenia (capital city + suburbs) is around 1100€ in the year 2002.

Graph 1: Bid prices for apartments in capital city Ljubljana 1995-2001(DM)

Note: Bachelor’s r. = Bachelor’s roomed around 28 m2, One r. = one roomed flatlet etc.

The supply of land for development has been shrinking in recent years. The price for building land in Ljubljana has jumped from 60 DEM (around 30€) in 1995 to around 200 DEM in 2000 and even more for some prime locations.

The prices of building land have risen even more than prices for apartments. The biggest “mark up” was in 1996 and 1999 when prices hit a record high. The price of one m2 land is 150 € or 300 DEM/m2 in 2002. Here we are talking about a plot without the construction (building) permit and services (infrastructure).

When a plot is bought other costs are a) the municipal contribution for sewage, electricity and water supply plus b) the contribution for changing the purpose of land (from non-building purpose to building purpose).

The final price of building land is then 300- 600 DEM/m2 or around 150-300€/m2. These elements present the “entrance threshold” on the construction market. It has to be overcomed by developers, building companies and investors.

Graph 2: Bid prices for land 1995-2000 in DEM for different regions

Source: Note: Bachelor’s r. = Bachelor’s roomed around 28 m2, One r. = one roomed flatlet etc.

The market for renting Residental Offices and Retail was very stable in 1995-2000 and remains stable. The market for renting Pubs has been more volatile.

Graph 3: Bid rent prices for Residental Offices, Pubs and Retail 1995-2001 in DEM/m2 per month


Table 2: Price stability of new dwellings, construction cost index and expensiveness of new apartments in Slovenia

Source: Statistical Yearbook, Slovenia, 2001
The relation between the construction cost index and CPI in the period 1995-2002 shows that the cost of construction – as a proxy variable for replacement cost – were above (in cumulative terms) the inflation rate. That is mainly due to extra (around 5%) growth of replacement costs in 1996.

Graph 4: CPI and construction Cost Index in Slovenia (1995-2002)

Source: Statistical office of Republic of Slovenia, Fiabci Slovenia, CCI Slovenia

It seems that market deviations in Slovenia have driven up replacement costs for residential property (in terms of construction cost index) beyond the “core” market trends of old apartments. We can conclude that base prices in construction industry have not fuelled prices of new apartments on the Slovenian real estate market.

3.2. What causes such a shortage of building land?

The wealth tax on the ownership of building land is negligible in comparison to the (potential) capital gain –when such a land is sold on the market. The companies in Slovenia do not pay wealth tax on land in use and on the idle land, which is not in use. The calculation then is very simple. Many companies hold a (non-) building land as a reserve asset with potential high capital gain. The opportunity cost is lower than the potential capital gain. There is a spate of taxes levied on real estate in Slovenia 2% transaction tax on real estate 20% Value Added Tax on new buildings (the lower VAT rate is 8.5% on goods) 25% tax on capital gain (if the real estate is sold before 3 years of ownership) Tax on inheritance (depends on the heir order: the first heir order is free of any tax and the maximum rate is 25%). Fee for construction land – depends on the quality of land '>Wealth tax – the maximum 1.5% rate and many exemptions.In general the tax regime on the real estate market is not high. Thus, the tax burden is very small on average, especially for business companies. The ownership of the land is widely spread among households in Slovenia. Many of them possess a small piece of land – not for use – but rather as an investment. People like land because of the historical memory on hyperinflation and a long period of negative interest rates in real terms. In the eyes of the people, land is a form of savings and a sound investment. This view could change quite soon once the projects of computerising the land register “e-land book” is completed and real estate is taxed without exemptions. The Slovenian Government has promised in 2000 to introduce a small tax rate on real estate (including land)- But there are problems with the current records and updating digital land register (book). We can expect that the different cadastral registers, land register and evidences will be completed by the end of 2003. This is a lengthy complex process. The costs of changing these registers are expected to be in the range of 30 million euros. The government endorsed this process at its session on 25 September 2002.
Box 1: The share of geodesic/surveyor's records in digital or analogous form in Slovenia (August 2002)

basic geodesic system


land cadastral


cadastral of buildings


state border


spatial and house numbers


topographic system


cartographic system


Source: and Geodesic Agency.

The ten-year-old de-nationalisation process (stipulated by Law) has halted many construction projects. This has been a difficult problem for developers. It has caused many administrative problems and has put the break on many projects in urban areas. The future prospects are promising. De-nationalisation proces reached its peak and the problems have been diminishing.

3.3. Dual Pricing (in local and foreign currency, namely DEM and now €) has not disappeared yet

The price quotation in advertising was in foreign currency in the period 1991-1999. Prices were commonly quoted in Deutsche Mark (DEM) – a reference currency. The act promulgated in 1999 abolished prices denominated in foreign currency (dual pricing).

According to the timetable for the integration in EU financial market, namely ERM2, it could happen that Slovenia will peg the tolar to the euro at the end of 2003. If so, then Slovenia has only 15 months to run its (independent) monetary policy.

The dual pricing will soon re-appear after pegging the local currency (tolar) to EUR. The act on denomination of prices will have to change by the end of 2003.

The probable effect on real estate market will not be high.

In general, long term contracts in Slovenia are denominated in local currency, with the currency clause (namely EUR). Around 87% of Slovenian exports are invoiced in EUR currency. Thus the EUR is an acceptable unit of measure, because the exchange rate to (former) DEM is around 2. People found out it easy to count.

Due to low inflation in EU countries, particularly Germany, households in Slovenia will soon adjust to a stronger and more stable currency.

4. The Turnover on Slovenian Real Estate Market and relation to other capital markets

The turnover in real terms on the real estate market has been rising since 1991 by 1-2% per year. We determined that the turnover on different segments of capital market is in positive correlation. Whenever something is happening in the “household” currency market then – it spreads the turnover on the other kind of capital markets in Slovenia.

Table 3: The turnover on different kind of capital markets for household in Slovenia

The turnover on the real estate market is estimated by the author[3]. Around 20-30% of the turnover has been intermediated by real estate agencies.

There are around 1000 registered real estate agencies in Slovenia. However, less than 300 actively advertise real estate properties. Relatively few agencies have their offer also in English.

The agencies are widely organised in Real Estate Association at the Chamber of Commerce and Industry Slovenia and Fiabci association.

There is a proposal for a Law in Parliament for intermediation. The Code of Ethic has been in preparation for consumer protection and regulating the conflicts between consumer and agencies.

We may conclude that the turnover on real estate market is positively and moderately correlated (r>0.55) witth the other kind of capital markets. All segments of capital markets have a positive trend.

5. Gradual Process of Liberalisation of Real Estate Market since 1991 and preparing for joining the EU and EMU

It is important to stress that Slovenia experienced in the period of 1970-1990 real negative interest rates: when borrowing and when lending (deposit and lending interest rates). Thus, the real estate and foreign currencies were functioning a long period as a means of saving. This historical fact influenced on prescribed articles in the Constitution of the Republic of Slovenia in 1991 that refers to property and partly on the article 68 that refers to the property rights of Alien

Period 1991- July 1997
In the period 1991-1997 we have had a very controlled situation regarding the property rights of aliens. Property Rights of Aliens were defined by Article 68 of the Constitution (1991) as follows:

"Aliens may acquire ownership right to real estate under conditions provided by law. Aliens may not acquire title to land except by inheritance, under the condition of reciprocity." [4]

The foreigners were not allowed to own land and any other real estate in the period 1991-1997. Foreign states, however, might acquire right to own property affixed to land, used by them for diplomatic or consular purposes.

We underscore hereby that companies with foreign capital were not treated as “Aliens” (foreigners). There were treated as resident (domestic) legal persons. Thus, the companies with foreign capital were equally treated as those with domestic capital.

In other words, all legal persons and natural persons are (equally) allowed to own real estate in Slovenia without any restrictions. That has been a rule through the whole period 1991-2002 – and will in the future.

B) Period from July 1997- to February 1999 and the transitional period of +4 years 1. Slovenia changed the Constitution on July 14, 1997 in the article 68 regarding the Property Rights of Aliens. The new wording reads as follows:

"Aliens may acquire ownership right to real estate under conditions provided by law or if so provided by a treaty ratified by the National Assembly, under the condition of reciprocity.Such law and treaty from the preceding paragraph shall be adopted by National Assembly by a two-thirds majority vote of all deputies." [5]

2. Slovenian National Assembly ratified the Association Agreement (AA) between the Republic of Slovenia and the EU on July 15, 1997. The AS was signed by Slovenian Government and by EU on November 11, 1996. Ratification was postponed because of the administrative procedures on both sides.

Along with the modifications to the Constitution, signing and ratifying the AS the Slovenian Assembly adopted The Law on Finding Out the Reciprocity (LFOR). It came into force on 14 February 1999. It is important for the EU citizens and others. [6]

The AA [7] entered into force in February 1, 1999. This is an important “cut off date”. At that time the AS was ratified by all parties in EU. We will explain in the following paragraphs that since February 1999 the EU citizens have been allowed to acquire ownership right to real estate, under the provisions in the AA. How was that determined and agreed upon?

According the AS the Slovenia has adopted the Treaty Establishing the European Community, including Chapter 4, which refers on Capital and Payments. The AS determined the transitional period, according to so-called “Spanish compromise”. It was written as ANNEX XIII to Association Agreement. The “Spanish compromise” determines the further liberalisation of Slovenian real estate market as follows: [8]

"Concerning the provisions of Article 64(2) of the AS relating to the Community rules on the movement of capital, and in view of Slovenia’s accession to the European Union the EU states confirmed (February 1, 1999) the following commitment of the Republic of Slovenia: I. to take the measures necessary to allow the citizens of the EU, on a reciprocal basis, the right to purchase property in Slovenia on a non-discriminatory basis by the end of the 4 year from the entry into force of the AS (that is: by the end of January 2003). II. to grant to the citizens of the EU, having permanently resided on the present territory of Slovenia for a period of three years, on a reciprocal basis, the right to purchase property from the entry into force of the Association Agreement (that is: from February 1, 1999)"

It should be noted that the “Spanish compromise” refers only “to purchase” and does not include other legal basis of acquiring property. It should be noted also that the milestone of February 2003 does not depend on the actual accession to the EU membership.

In the period from February 1999 to March 2000 around 45 aliens applied for the right to purchase property in Slovenia. Until the end of 2001 this number has increased by around 100%. On the other hand foreigners also sell the (inherited or previously acquired real estate) in Slovenia.

What is the regulation on purchase of real estate in Slovenia for non-residents and branches of foreign companies?

According to Article 25 of the Foreign Exchange Act (Official Gazette of the Republic of Slovenia Nos. 23/99 and 35/01), non-residents and branches of foreign companies may acquire real estate in Slovenia under the conditions stated by the special law or ratified and published international treaty.

Aliens have had 0.7% - 3.5% market share on real estate in Slovenia in the period 1997-2002. The share varies among regions [9] It should be noted that the actual share of non-resident in Slovenian real estate market is higher. Namely, the resident persons are all companies that are in the foreign ownership. Due to high inflow of direct investments in Slovenia it is the fact that the foreigners may and do acquire a lot of land and dwellings indirectly in Slovenia.

The approach of the foreigners to Real Estate market has increased slightly in recent years – particularly indirectly – through the small (obligatory limited) companies and through direct investments in existing Slovenian companies and banks.

Slovenia is going into EU and will further liberalise and adjust regulation on real estate market to EU standards. For example, there is a proposal to adopt the Law on intermediation on the real estate market. The new law will regulate agents and protect the customers (mainly households) against (abuse) intermediate companies.

If the program on environment, spatial and urbanism is going to be realised – together with tax reform by the 2004 it is expected that the prices will go down.

C) Payments with the rest of the world that refers on real estate market are free
Payments abroad pertaining to the liquidation of foreign direct investments or sale of real estate (including capital gains) have been free in the period 1991-1997. That remains unchanged. Payments abroad are free of any restrictions after all (tax and other) obligations in Slovenia have been met.

Transfer of proceeds from realisation of inheritance is free under the condition of reciprocity that is guaranteed between Slovenia and the country of the recipient.

D) Fixing Exchange rate to EUR should be well prepared

Slovenia has a managed floating exchange regime. The current account of the balance of payments has been in equilibrium in the period 2000-2001. The small surplus has been reached in 2002.

Due to stable current account in the long run period the capital movements have been liberalised in the period 1997-2002. Nevertheless, according to Association Agreement with EU the Bank of Slovenia has the right to introduce some short-term restrictions in the case of series deterioration in foreign trade or capital movements.

Net inflow of foreign capital (namely direct investment in the existing companies - greenfield investment) has increased in the period 2000-2002. The central bank has to sterilise unstable net inflow of foreign money – which reaches sometimes more than 10% of GDP.

It is expected that Slovenia will fix its currency and join the ERM2 from 1.1.2004. That is uncertain today and depends on several factors. The most important will be the inflation rate. The current CPI is between 7-8% in 2002. The producer prices are lower.

The fixing of local currency to EUR will be very important moment. If the household sector estimates that the fixing rate is not appropriate then it will affect the capital markets.

Namely, the household sector could change a large share of its portfolio:

- from or to local currency deposits with banks

- from or to real estate

- from or to foreign currency deposits (mostly € denominated).

Graph 5: Change of the portfolio of households related the day “D for EURO”–1.1.2002
Source: Bank of Slovenia, Real Estate Association and own calculations.

It is assumed that households will behave rational. How big changes can happen? We have learned something at end of 2001 – a few months before the EU national currencies were exchanged to € coins and banknotes.

The National Assembly took the Natinal Program of Housing in 2000. Namely, according to »national housing saving scheme« around 10% of households in Slovenia has been already included in long-term savings with the commercial banks. The interest rate on these savings has been subsidiesed.

It is expected that 45% of households which are included in »national housing saving scheme« are going to buy new flats around capital city. According to surveys it is expected that the demand in the central (state) area will increase by even 52%. [10]

According to the scheme and according to the valid contracts it is expected that the banks will put on the real estate market the volume of loans of around 2% of BDP. That rises many questions and uncertanty of the future market. Some lending for the construction purposes should be postponed into the future. If not, that could put some additional price pressure on the market.

6. Real Estate Indicators for Slovenia

A typical developer on the real estate market is faced with high “entrance threshold” on construction market, measured by high prices of building land. The administrative procedures of all permissions for the construction are complicated.

A typical investor is the bank, housing funds, semi-state funds, co-operatives, leasing companies, big companies etc. The banks offer mortgage-backed loans. The repayment period is long term (5 year, 10 year and sometimes 15 and even 20 years). The 20 years long term loan still puts too high financial burden in young families. There are no (mortgage) loans on the period of more than 20 years. The Government has put forward the proposal of Law on mortgage bonds in September 2002. In general, morgate market is underdeveloped in Slovenia. There are no Real Estate Investment Funds.

A typical real estate agency has 1-3 employees. Real estate agencies intermediate 20-30% transactions on the real estate market. The intermediation is higher in the cities and lower in the underdeveloped regions.

A typical builder is an normal building company like elswere in Europe

Table 4: Real Estate Indicators in Slovenia in period 1995 – 2001


Definition, Comments and Measurement Issues


1. Real estate price index

The actual prices are not collected even though y the Tax Administration has all contracts. The real estate market is not transparent

Only bid (declared) prices are available from e-advertisements database. Time series reflects the trend of the prices – not the actual level. The bid prices overshot the actual between 5-20%.


2. Construction cost index

Published by Fiabci Slovenia, Association of construction at CCI Slovenia and SICGRAS Slovenia. Construction cost index is published on a monthly basis.



3. Rents

The actual data are not available. Advertising bid prices serves as a proxy variable. See:

Bid prices

4. Land prices

  The actual prices are not available even though the Tax Administration has all contracts. Only bid prices are available from e-advertisements database



5. Supply and demand


  (i)Property stock available

In preparation of the advertising agency.


  (ii)Vacancy or occupancy rates

The government estimated the gap between demand and supply in 1999 – for dwellings.

Not regularly

 (iii)Number/value of new buildings

Published by Statistical Office of Republic of Slovenia in Statistical Yearbook, yearly basis


  (iv) Number/value of sales

No one measures the tightness of the market.


  6. Stock price indices



  7. Exposure to the real sector


  (i) Loans outstanding 

The data are available in the Bank of Slovenia

Monthly Bulletin (


  (ii) Loan-to-value ratio

Relation: loan < market value of property -cost of selling discount for emergency sell) is prescribed by:

a)Bank of Slovenia regulation ====> loan < 100%

b)commercial bank risk management regulation ===> loan =150%-200%



1.The table is adjusted to the Indicators published in the Occasional Paper, No. 212, IMF, in the article Financial Soundness Indicators: Analytical Aspects and Country Practices (author: V.Saundararajan, Charles Enoch, Armida San Jose, Paul Hilbers, Russell Krueger, Marina Moretti and Graham Slack), page 32-33.

2.Real Estate Association at the CCI Slovenia , 2002.

3.Monthly Bulletin, Bank of Slovenia, Fiabci Slovenia (Magazine: Informator, IV/2002)


[1] I wish to thank Mr. Maver Jerkiè, Secretary of the FIABCI Slovenia for his valuable comments and advice that have helped me to prepare this paper. My sincere thanks also go to Ms. Barbara Stariè-Strajnar, State Undersecretary in the Ministry of Environment, Spatial Development and Energy for her guidance.

[2] See more about Housing problems in Slovenia: B.Stariè-Strajnar, Housing sector in Slovenia, Ministry of Environment, Spatial and Energy, text prepared for OECD Conference on Housing problems, Paris, 2000 (mimeo).

[3] See: Anton Kožar, Poveèano kupovanje prebivalstva, The Voice of Commerce (Glas gospodarstva), Ljubljana, July-August 2001

[4] Official Gazette of the Republic of Slovenia, Nos. 1-4/91-I and 19/91.

See also:

[5] Official Gazette of the Republic of Slovenia, Nos. 1-4/91-I and 19/91 and 42/1997.

See also:

[6] For example, for the USA citizens. What are the rules of reciprocity?

According to the Law on Finding Out Reciprocity it should be noted that the USA citizens have very favourable position on Slovenian real estate market. Namely, Slovenia inherited the international treaties (by Constitutional Law in 1991) that were ratified by the former Yugoslavia. But former Yugoslavia inherited some international treaties that were signed by Kingdom Serbia.

Thus, we have to note that in this way Slovenia inherited the Trade Treaty between Kingdom Serbia and United States of America from the year 1881. This Trade Treaty is still in force in Slovenia. It contains a clause “with most favoured state” regarding possessing real estate and personal wealth, on the base of reciprocity. We may conclude that the USA citizens have on the base of reciprocity quite liberal access to real estate market in Slovenia. Namely, the application at the Ministry of justice – put forward by applicant or buyer or real estate in Slovenia – has to be solved within 90 days. Of course, under the condition that all prescribed documents are presented in the adequate manner.

[7] Official Gazette of the Republic of Slovenia, Nos. 13/97, International Treaties.

[8] Official Gazette of the Republic of Slovenia, Nos. 13/97, International Treaties, page 874.

[9] This is the reason that the majority of real estate agencies do not have the English version of their Web site.

[10] See: Ministry of Environment, Spatial and Energy, A Survey among households included in the national housing saving scheme, July 2001, (mimeo).