Real estate prices are rising and are expected to continue to rise
Real estate prices continue to rise, influenced by low unemployment, wage growth, and low household debt, which strengthen demand, primarily due to modest supply. With the decrease in interest rates, demand for residential loans is also increasing more rapidly again.
The price of real estate in a given market depends on numerous macroeconomic factors, the most important of which are:
- economic growth, which increases demand for real estate and thus raises prices
- interest rates, whose changes affect the accessibility of financing
- inflation, which can increase construction costs and thus real estate prices, but at the same time can encourage investment as a hedge against loss of money value
- employment and stable income lead to higher demand for real estate
- demographic factors influence demand for different types of real estate
- government policy: tax incentives, subsidies for purchasing real estate, and regulations in the construction sector affect supply and demand
- availability of building land, which is limited in urban areas, can increase real estate prices
- market conditions: the dominance of buyers or sellers and current conditions in the real estate market also affect prices.
Understanding these factors is crucial for analyzing and predicting real estate price movements. The Bank of Slovenia highlights the area of real estate in its autumn report. Real estate prices continue to rise, influenced by low unemployment, wage growth, and low household debt, primarily due to modest supply. With the decrease in interest rates, demand for residential loans is also increasing more rapidly again.
The Bank of Slovenia also estimates that the overvaluation of residential real estate has increased again in the first half of the year, as in 2024, residential real estate prices are nominally 50% higher compared to 2008. Real prices of residential real estate have stagnated in recent years due to high inflation, and in 2024, prices exceeded those of 2008 by 8.8 percent. Therefore, the same source predicts that residential prices are likely to continue to rise, as the overvaluation of residential properties has strengthened again.
Limited supply and lower interest rates can further drive up real estate prices, as there has also been a decline in the issuance of building permits in the past year. Investments in residential real estate reach only half of the average in Europe, but this is increasing pressure on prices, warn macroeconomists. Housing prices will also rise due to the decline in interest rates for residential loans. The Bank of Slovenia also notes that the number of transactions with residential properties is at its lowest level in the last ten years. To balance the market, it would be necessary to build homes that are not too expensive and oversized, especially in Ljubljana, Primorska, and Gorenjska, with the complicating factor being – as in many areas – the shortage of workers and higher construction costs.
If you are facing a major life decision about buying or selling real estate, licensed real estate agents from BCaktiv agency will be happy to answer your questions and provide you with professional advice in your decisions.
