Foreign buyers of second homes in Slovenia – Translation of an article that appeared in Slovenia’s daily financial newspaper on 13 June

It is hard to assess the number of transactions in Slovenia to foreign buyers. EU citizens and some other nationalities have reciprocal rights and can own real estate here. Others, such as Russians, have to set up Slovene companies in order to acquire real estate. The Surveying and Mapping authority estimates that only 3.6% of house sales in Slovenia in 2016 were to foreign individuals, and 1.6% of apartment sales. That equates to only 166 houses and 141 apartments. It is not clear how many additional transactions through companies took place, but it is fair to say that foreign buyers of holiday homes have very little impact on the Slovene real estate market.

Justin Young of Slovenia Estates has been selling homes to foreign buyers since 2008. The company saw nearly 20% increase between 2015 and 2016. All their buyers are cash buyers with no need of bank finance, and generally have a budget of 200,000€. Their Clients are typically from the UK and elsewhere in the EU, and Russia and Ukraine. They are looking for homes in Ljubljana, Upper Gorenjska, especially Bled and Bohinj, and the Upper Primorska area such as Soča, Trenta and Bovec. Most buyers look for properties in need of refurbishment, once transformed they rent them out to holidaymakers.

The British invasion of Prekmurje

British buyers in Prekmurje created some excitement some years ago, when around 300 families acquired holiday homes. The transactions have slowed to a trickle however, with only 3 sales to British buyers in the region last year.

Buyers of holiday homes on the coast primarily Slovenes

The story on the Slovene coast is quite different. There are many transactions of second homes each year, but almost exclusively to Slovenes, with a few to Russians. Half of the 190 apartments in Residence Livade in Izola were sold to locals looking for primary residences, and the other half as second homes. Typically, during economic downturns, sales in resort destinations with large numbers of second homes simply die. Developers go out of business, real estate agents shut up shop, and service providers such as mortgage brokers disappear. Spain still has 340,000 unsold newbuild apartments dating from the 2009 crisis. The Slovene coast however showed remarkable resilience during the financial crisis. Prices and transactions did drop but not drastically, considering the reliance on second home buyers.

Where are the hotspots?

So if foreigners are not buying in Slovenia, where do they go for their dream holiday home? Sun starved northern Europeans love Spain, especially the Costa del Sol with its 300 days of sunshine, dozens of championship golf courses, world class marinas and excellent shopping and nightlife. Foreign investors started to return to the Spanish property market in 2014. In 2015, foreign homebuyers bought around 48,000 properties in Spain, up more than 13% on the previous year. This represented approximately 13% of total home sales in Spain.

British remain the number one foreign homebuyers in Spain, accounting for about 21% of all home purchases by foreigners in 2015, followed by the French, German, and Swedish buyers, each accounted for about 6% to 7%. Chinese buyers are also increasing, representing around 4% of all transactions. The Golden Visa scheme, introduced in September 2013, has resulted in increased interest not only from the Middle East but also from Asia and Russia. Under this system, any non-EU national investing more than 500,000€ is automatically granted a Spanish residency permit. From October 2013 to December 2014 the Golden Visa scheme attracted 531 applicants, mostly Chinese and Russians. Spain has received more than 700m€ in foreign investment as a result.

According to Jelena Cvjetkovic at Savills in London, Mediterranean hotspots such as Mallorca and Ibiza continue to attract an international mix of buyers. Quinta do Lago in Portugal remains a firm favourite with British buyers. An emerging trend is transactions to northern european buyers in larger coastal cities with a cosmopolitan outlook, which attract second home buyers and investors, such as Lisbon, Barcelona, Palma de Mallorca.

What does the future hold?

We can expect to see new trends as the baby boomer generation, born between 1946 and 1964 reaches retirement. Around 10,000 individuals retire every day in the US alone, and this will have an impact on the second home market worldwide. A large percentage of boomers will live 10 to 25 years longer than their parents, and many have the desire to move when they retire. Many have substantial equity in their homes which can be sold to fund a cheaper home abroad, and improve their quality of life in a location with a better climate. Those who reach retirement age now are often physically healthy enough to run marathons, build houses and start new businesses. For these reasons, retirement communities have become less attractive for many boomers, who are seeking a different lifestyle and new challenges. Many of them are migrating to a life in the sun.

A holiday home in a hotel

Condo hotels might be the answer for developers in Slovenia who find it difficult to raise funding. Hotels are expensive to build in Slovenia, at around 100,000€ per room for a 4-star property. Add leisure infrastructure such as a spa, and the costs ramp up to such an extent that any return on investment could be many years away. The opportunity to sell off part of the resort right after completion is compelling for developers, and sometimes the only way to realise the project, as a way of immediately deleveraging the debt. This system works particularly well in highly seasonal markets, and is therefore perfect for Slovenia. Although hotel condo units are typically referred to as ‘residences’, most owners only occasionally use their apartment or room and instead place it in the resort’s rental pool, splitting rental proceeds 50/50. The condo owners share in the cost of maintaining the property, but in return often benefit from healthy capital gains.

Mobile pods

We can expect to see an increase in mobile pods, such as the ‘Coodo’, manufactured in Macedonia. Coodo owners can holiday where they choose, and simply relocate the coodo when they get bored. Simply put, a coodo is a designer pod consisting of a frame with nicely rounded corners and stabilizing sturdy walls constructed of heavy glass. Perfect for hipster baby boomers who want to relive their youth.

Holiday at sea, all year round

For the filthy rich, another option is The world – residences at sea. The World is the largest residential ship on the planet, with 165 homes. Residents and guests never stop exploring as the ship circumnavigates the globe. The plan for 2018 includes Miami and New Orleans before heading to the Caribbean, then on to the east coast of South America, where the ship will make maiden voyages to several Brazilian destinations. In March, they will cross the Atlantic to the islands of Cape Verde before moving on to the Mediterranean for Spring. Western and Northern Europe await in summer, including an Expedition to the remote and rugged Svalbard Archipelago. In September, Residents & Guests will enjoy exploration of the British Isles, followed by a return to the Mediterranean and the Canary Islands. They will then finish the year in the middle of the Atlantic on the volcanic islands of Ascension and St. Helena before welcoming the first light of 2019 on the southern tip of Africa.

Jacqueline Stuart is a Director of S-Invest d.o.o.