Friday, April 16, 2004

Real estate booming in ex-communist states

By Andrea Dudikova
The Associated Press

BRATISLAVA, Slovakia - Capitalism never looked so good - or cost so much.

As a large swath of formerly communist eastern Europe prepares to join the European Union on May 1, the real estate market in Slovakia and several other countries is booming, with prices rising for everything from old town villas of architectural interest to nondescript apartments in bleak high-rises.

Since communism collapsed in Eastern Europe, the landscape has changed dramatically. Investors have built hypermarkets, shopping malls, luxury housing and offices, and put millions of dollars into extensive facelifts and renovations of downtown areas - all unheard of under the previous regime, and at prices equally unheard of.

"There was a lot of publicity in the media that entry into the EU would increase prices," said Milada Bednarova of Palisady real estate agency in Bratislava. "People went a little crazy and started selling at the highest prices, and buyers had to buy at those prices."

Over the past five years, prices of apartments have soared in Bratislava - even in Petrzalka, a bleak part of the city that houses 120,000 people in gray, cement-block high rises that earned it the inelegant nickname "Bratislava Bronx."

A nonrenovated two-room apartment in a high rise bought three years ago for $28,850 easily sold last year for $48,585, Bednarova said.

A square meter of living space in Bratislava sells from $760 to $1,820, and real estate agents say the high prices won't decline anytime soon.

Bednarova said the market in the capital of 428,000 people was so tight last year that even those who had money had little to buy. New apartments in Bratislava are being snapped up quickly, in some cases before they're even built.

It's a dramatic shift from the old system, when home ownership was restricted to houses and was an elusive dream for most people making do with state-owned rental apartments they couldn't purchase until communism ended in 1989.

Yet relatively few can afford to buy a new home in a country where the average monthly salary is $435. Many must be content refurbishing shabby apartments with new plastic windows or tiles.

Slovakia will join the EU along with seven other former communist countries: the Czech Republic, Hungary, Latvia, Lithuania, Estonia, Slovenia and Poland. Also joining are Malta and Cyprus.

The Czech Republic has seen a steady growth of prices for apartments and houses over the past few years. Last year alone, apartment prices jumped by 30 percent in the capital, Prague, and other cities.

However, the cost of flats in communist-era high-rises has begun to decrease, and Czech real estate agent Dobromila Rouskova says some "are impossible to sell."

In Hungary, the greatest price boom is over, but prices increased by 200 percent to 300 percent in most of Budapest's neighborhoods about four years ago. And market watchers say demand to rent or buy commercial real estate, especially office space in downtown Budapest, will rise.

Associated Press reporters Karel Janicek in the Czech Republic and Pablo Gorondi in Hungary contributed to this story.

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