Slovenia: Jet to Let Guide to Slovenia

The story so far…

From the 14th century, most of Slovenia formed part of the Austro-Hungarian Empire and, following its collapse in 1918, the Slovenes joined the Croats and Serbs to form a new state which became Yugoslavia in 1929. Occupied by German, Italian and Hungarian armies during the Second World War, Yugoslavia was liberated by the Soviets, who established the Communist Federal People’s Republic of Yugoslavia (FPRY). This comprised the present-day independent states of Slovenia, Croatia, Macedonia, Serbia and Montenegro, and Bosnia and Herzegovina. Present-day Slovenia gained independence from the FPRY in 1991. Slovenia joined the European Union (EU) in May 2004.

Where is it?

Slovenia is in South-Eastern Europe with 46.6km of coastline to the Adriatic Sea in the south-west. Slovenia borders Austria to the north, Hungary to the north-west, Croatia to the south and east and Italy to the west. The country’s total area is 20,273km squared.

What is the weather like?

Slovenia’s climate varies across the country. The north-west has an Alpine climate with lots of rain, moderate summers and cold winters. The Adriatic coast has a pleasant sub-Mediterranean climate with warm weather throughout the year and mild winters, while inland and the eastern parts of Slovenia have a typical Eastern European climate, with hot summers and cold winters. Slovenia gets most of its rain in the spring and autumn.

Language

Slovenia has an estimated population of just over two million people, consisting of ethnic Slovenes (83.1 per cent). The ethnic minorities are mainly ex-Yugoslav nationals, such as Serbs, Croats, Bosnians and ethnic Italians and Hungarians. The official languages are Slovenian, Italian and Hungarian.

Currency

The Slovenian currency is the Tolar (SIT), which is worth 100 Stotin. Slovenia is scheduled to adopt the euro on 1 January 2007 and is likely to achieve that target and become the first of the new 2004 EU entrants to adopt the single currency. The Slovenian Tolar is pegged to the euro at SIT 239.640: € 1.

Politics

Unlike some other former republics of Yugoslavia, Slovenia avoided much of the fighting that beset the Balkans during the 1990s. The country has made good progress towards developing a market economy and has a stable democratic political system.

The current government coalition comprises four parties: the Slovenian Democratic Party, the New Slovenia Christian People’s Party, the Slovenian People’s Party and the Democratic Party of Pensioners of Slovenia. Janez Drnovsek, from a centre-left party called Liberal Democracy of Slovenia, was Prime Minister in 1992–2002. He now serves as President of Slovenia until 2007. The current Prime Minister is Janez Jansa, elected in 2004.

Economy

Slovenia is one of the top economic performers of the countries that joined the EU in 2004. As part of the Yugoslav Republic, it accounted for 20 per cent of total GDP and 33 per cent of exports. Now Slovenia enjoys the highest standard of living and the highest GDP per capita of the ten new member states of the EU.

Privatisations in the banking, telecommunications and utility sectors stimulated growth and foreign direct investment (FDI) is expected to increase over the next few years as restrictions on foreign investment are slowly abolished. Slovenia’s economy is highly dependent on trade and is focused mainly towards the EU.

Economic growth reached 4.2 per cent in 2005 after a relatively slow performance in 2003 (2.7 per cent) and is forecast to remain strong. Slovenia is growing at a robust pace, with low inflation and low unemployment and is almost certain to meet the necessary criteria to adopt the euro in 2007. This said, Slovenia continues to face economic challenges with relatively high taxes, an inflexible labour market and much of the economy still under state control. In 2005, the government put plans in place to address these issues.

Economic growth

The European Commission reports that real GDP in Slovenia is expected to grow by 4.0 per cent in 2006, after growing 4.2 per cent in 2004 and in 2005. GDP per capita was €18,900 in 2005.

Year Real growth of GDP (%)
2000 4.1
2001 2.7
2002 3.5
2003 2.6
2004 4.2
2005 4.2

Source: Eurostat, the Statistical Office of the European Communities

Inflation

Inflation, at 3.6 per cent in 2004, fell to 2.5 per cent in 2005.

Interest rates

The interest rate in March 2006 was 3.5 per cent.

Unemployment

Unemployment in Slovenia is the lowest among the Eastern European 8 and is lower than the EU average. The labour market is strong and employment growth is steady.

Unemployment rate (percentage unemployed)
2000 6.6
2001 5.8
2002 6.1
2003 6.5
2004 6.0
2005 6.3

Source: Eurostat, the Statistical Office of the European Communities

Foreign direct investment (FDI)

Slovenia was initially slow to attract FDI, and had one of the lowest FDI per capita rates in the EU. However, the present government is committed to attracting more overseas investment and has introduced a number of policies.
Between 2004 and 2006 Slovenia received EU structural aid of €433 million for projects such as motorways. The country will attract higher amounts of FDI in the future, contributing to the multiplier effects which positively impact the national property market.

The greatest proportion of FDI goes into manufacturing, financial services, trade and tourism.

Foreign direct investment in Slovenia (€ million)
1999 2,675.0
2000 3,109.8
2001 2,952.4
2002 3,922.9
2003 5,131.0
2004 5,556.7
Source: Bank of Slovenia

The property market

The Slovenian property market has performed well in the last couple of years. It’s supported by local demand, as well as by jet-to-let investors, who can now purchase properties relatively hassle free after Slovenian entry into the EU. Foreigners are attracted by Slovenia’s economy, overall stability and its eye-catching natural beauty.

The number of jet-to-let investors in Slovenia is still relatively insignificant with the British being the main foreign buyers (29 per cent), followed by Germans and Austrians. The lack of mortgage finance for foreigners, hence the inability for investors to gear their portfolios with local funds, has kept a brake on the market so far, but this situation is likely to change in the future.

Slovenia is set to adopt the euro by 2007, which will give a further boost to its property market. The country’s attractive landscape and geographical diversity are also attracting a large number of tourists. The inflow of British holidaymakers alone has increased by 17 per cent during 2005. The rental market is also expected to remain healthy supported by a growing economy and an increasingly robust tourist industry.

The overall prospects for the Slovenian property market are positive.

Property hotspots

Ljubljana is the political and commercial heart of the country. Property prices rose 32 per cent last year, initially in the city centre, followed by the suburbs. Property and rental demand is strongest for older historical houses in the city centre and for modern new-build apartments. Cheap flights bringing jet-to-let investors, as well as tourists from Europe, have been a factor in the growth of property prices, not just in Ljubljana but throughout the country.

The rental market is well established in Ljubljana, particularly around the main tourist areas. Elsewhere, the market for property in Slovenia is still relatively immature but growing.

Jet-to-let investors are presently concentrating their efforts on buying properties in the tourist areas rather than in the capital. Property prices in the western coastal region of Primorska, which is very popular for adventure sports, and the Alpine region of Gorenjska with the ski resorts of the Julian mountains increased up to 30 per cent. British and Irish investors are the prime movers in the Gorenjska region, where the ski resort Kranjska Gora is the most popular, followed by the picturesque towns of Bled and Bohinj.

Rural properties are popular in the area of Pomurje in the north-east, offering stunning countryside with vineyards on the hills and the region’s main attraction of thermal health resorts. Again, this region is in great demand from British, Austrian and German investors so competition is high.

Transaction costs

There are no restrictions for EU citizens buying property in Slovenia. For non-EU citizens there is an option to incorporate a company in order to purchase property.

In most cases, buying property in Slovenia is straightforward and uncomplicated. Offers are usually made by a lawyer, who often acts on behalf of both the vendor and the purchaser. The buyer is required to pay ten per cent deposit. Foreign buyers will need to apply for an EMSO number (a unique identification number that Slovenian citizens receive at birth), which is usually provided within two working days. The estate agent or a lawyer will be able to help you to obtain an EMSO.

The transaction costs are:

• Land registration costs are payable to the Land Registry. This fee is about €150.
• Notary fees come to approximately €300.
• Legal fees are about €500.
• Estate agents’ fees amount to two to four per cent of the property purchase price.
• A translation fee is around €200.

Overall costs will come to about five per cent of the purchase price.

Annual costs

• Property Tax is paid annually. The tax rate varies depending on the property size.

• Public utility costs (apartment communal charges) on average come to €20 per month.

Taxes

Income Tax
Income Tax is paid at a progressive rate of 16–50 per cent as of 2005.

Corporation Tax
The rate of Corporation Tax is 25 per cent.

Capital Gains Tax
Capital gains of companies are taxed as income. Individuals are taxed at progressive Income Tax rates.

Facts at a glance

Geography

Population (2005 estimate): 2,011,070
Language: Slovenian
Ethnic groups: 83.1% of ethnic Slovenians. Ethnic minority groups include mainly ex-Yugoslav Serbs, Croats and Bosnians
Local currency: Tolar divided into 100 Stotin

Political system

Political structure: Parliamentary republic
President: Janez Drnovsek
Prime Minister: Janez Jansa
Main parties: Slovenian Democratic Party, Liberal Democracy of Slovenia

Economy

Unemployment rate in 2005: 6.3%
Unemployment rate, February 2006: N/A
Inflation rate in 2005: 2.5%
Inflation rate, February 2006: 2.3%
Interest rate, March 2006: 3.5%
GDP growth in 2005: 4.2%
GDP growth forecast for 2006: 4.0%
GDP per capita: (income €18,900 per person) in 2005

Taxation

Income Tax: 16–50%
Corporation Tax: 25%
Capital Gains Tax: Taxed as income

Corruption statistics

Corruption rate: 6.1
Corruption rank: 30th

Industry and technology

Major industries: Lead and zinc smelting, Wood products, Chemicals

The Slovenian property market

Hotspots: Ljubljana

Property taxes (transactions)

Land registration costs: €150
Notary fees: €300
Estate agents’ fees: 2–4%
Legal fees: €500
Total fees: About 5%

Property taxes (annual)

Property Tax: Varies

Mortgage

Mortgage availability: Mortgages are currently not available to foreign buyers

Investor resources

Embassies

British Embassy in Slovenia
Trg republike 3
1000 Ljubljana, Slovenia
Tel: +386 1 200 3919
Fax: +386 1 425 0174
Website: www.britishembassy.gov.uk/slovenia

Slovenian Embassy in the UK
10 Little College Street
London SW1P 3SJ
Tel: 020 7222 5400
Fax: 020 7222 5277
Website: http://slovenia.embassyhomepage.com

Useful websites

Bank of Slovenia
www.bsi.si

Invest in Slovenia
www.investslovenia.org

Statistical Office of the Republic of Slovenia
www.stat.si

Tourism in Slovenia
www.slovenia-tourism.si

© Lawpack Publishing 2006

“The Jet–to–Let Bible”, Dominic Farrell
Reproduced with the permission of Lawpack Publishing.

Further information on this topic can be found in “The Jet-to-Let Bible”, by Dominic Farrell, ISBN 1 905261 11 X

For information and advice on investing overseas, contact Bewarethesharks.com on +44 (0) 151 482 5525 or visit www.bewarethesharks.com

www.jet-to-let-magazine.com

All circumstances vary. BuyAssociation provides general advice for guidance purposes only. It is strongly recommended that you seek professional advice before making any purchase.