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As the credit crunch continues, some market players are secretly sighing with satisfaction. It is, after all, the best time to go shopping - assuming you have enough money to do so. Thus far, there is no sign of any shopping spree in the development sector; however, regarding purchases of properties, there is some evidence of activity.

The Actual Scenario

Investors with cash at their disposal still seem to be waiting for the absolute bottom, which experts expect to be at the end of the third quarter of this year, although the economic condition we are facing might last until the end of the year. Companies and individuals are still afraid to make decisions about purchases. They are still nervous about further deterioration of market conditions, as well as buying at prices that are still too high. According to the Surveying and Mapping Authority of Slovenia, the number of apartments sold dropped by 58% over the last 12 months, while the number of houses sold nose-dived by 85%. Those numbers accurately reflect the actual situation of the market.

When to start looking for a bargain?

The date of the bottoming out of the economy is unknown, although observers of the real estate sector advise not waiting any longer to begin the process of acquisitions. Jacqueline Stuart, a real estate expert and director of the company Slovenia Invest stated at her appearance at the SDBP's spring conference last month of April that the right time to buy is actually right now, before prices pick up.

Indeed, investors wishing to acquire a property or development areas usually do not do so in a matter of days. In fact, it is a time-consuming process, requiring patience and a good eye for the market. Investors wishing to buy at a good price are advised to start closely looking at the market early on, indentify projects or properties of interest and start the first step of negotiations now. It might not be the right time to buy today, but as prices are progressively dropping and sellers are becoming more reasonable, buyers who have already contacted sellers or agencies and shown interest will certainly be the first ones to be informed about bargains. Therefore, the advice is not to rush the whole buying procedure, but to delay the purchase in an informed and open way, understanding the pressure sellers are facing and acting on it at the right time. As the saying goes, negotiations are a game; but if you wait too long, someone else might be outbidding you on your desired property.

At the same time, buyers should start planning their financial support for the investment by talking with experts in the field. Banks offer conditions that vary widely from each other, and simply by "shopping around" and seeking the best rate, bargain hunters may save thousands of euros in the long run.

How much cheaper is Real Estate?

Many small and large investors are expecting some spectacular bankruptcies, bank foreclosures and the associated possibility of taking over such properties. In a recent talk with ABC Nepremičnine, it seems the market is indeed moving in this direction although we are not there yet. Owners under financial distress are now progressively being forced to sell due to the pressure they are facing from banks. The lack of liquidity among both developers and individuals is leaving sellers with no choice but to be flexible and accept offers that were completely unacceptable a couple of months ago.

Investors are counting on cheap acquisitions; in negotiations, they are trying to obtain the greatest possible reductions and they are succeeding in doing so. In Slovenia, there has been a reduction in the asking price from 20 to 40 percent, even when assuming that these asking prices were at a lower level than before the economic downturn.

Have we now reached the lowest level?

The general consensus among experts and observers, as heard several times at the real estate event "Real Vienna," is that we have not. Properties in the most attractive locations and cities do not seem like they will get any cheaper soon; therefore, investors will have to be proactive and negotiate if they wish to obtain lower prices. Merely watching the market passively and waiting for the prices to go down simply won't do. Many investors have already taken the first step and opened negotiations, although few have finalized their deals. As Ms. Oblak from ABC Nepremičnine said, "People are still waiting to make their final decision."

Hard negotiations

Negotiations between sellers and buyers were simpler and shorter during the bull market between 2003 and 2007. Even if buyers had paid too much for a plot of land or property in comparison to the market prices of the time, they would not lose as the mad growth rates of properties prices compensated for this. Nowadays, buyers are much more cautious and know perfectly well the risks of buying too expensive property in the long run.

It seems like speculators have learned a hard lesson: usually there is no quick profit in real estate and every investment must be meticulously evaluated regarding its value potential in both the short and long run. With prices falling, the Euribor rate at record low and no real signs of recovery, good deals are made by those who are smart enough to catch the windows of opportunity that are about to open.