Slovak Property Prices Approaching Risky Zone, Central Bank Says

(Bloomberg) -- Residential property prices in Slovakia rose at the fastest pace in almost nine years in the first quarter as record-low interest rates and the booming economy fuel demand for housing.

The average price per square meter grew an annual 7.6 percent to 1,332 euros ($1,453), compared with 1,304 euros in the last three months of 2016, the central bank in Bratislava said on its website Wednesday. While prices still remained 14 percent below the pre-crisis peak reached in 2008, the composite index for the average apartment cost “has slightly surpassed the threshold of the risky zone,” the central bank said.

Declining interest rates on mortgage loans and rising employment have spurred demand for housing in the country of 5.4 million that adopted the euro in 2009. The economy added 60,000 jobs last year and its growth is projected to exceed 4 percent in two years as new factories such as an assembly plant of Jaguar Land Rover Plc begin production.

Accelerating loan growth has already prompted the central bank to ask lenders to hold more capital in the so-called counter-cyclical buffer and tighten credit rules. Even as prices are set to continue increasing, the pace of growth will probably slow down because of new regulations and completion of new housing projects, the central bank said in Wednesday's report.

To contact the reporter on this story: Radoslav Tomek in Bratislava, Slovakia at rtomek@bloomberg.net.

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net, Peter Laca, Paul Abelsky