Slovenian Real Estate Prices Slide

The conservative candidate Zoran Jankovic, a former major of Ljubljana, won a narrow victory in the Slovak Republic’s presidential elections on December 2011 over the "Democrat" Janez Janša. But the new president will struggle to rule effectively, given his thin support in parliament, according to Osservatorio Balcani e Caucaso (OBC), an NGO monitoring Balkan politics.

As a eurozone member, Slovenia´s housing market is also likely to suffer from the the euro’s crisis and possible eurozone recession. Until the euro crisis heads towards a real solution, uncertainty is likely to be the main driver.

A vulnerable banking sector The banking sector is weak and vulnerable. Slovenia’s credit ratings reflect the financial difficulties:

  • Moody´s has recently downgraded for the second time in three months Slovenia´s local­ and foreign­currency government bond ratings by one notch to A1 from Aa3, and placed the ratings on review for possible further downgrade.
  • Standard & Poor´s has placed its ´AA­´ long­term and ´A­1+´ short­term sovereign credit ratings on the Republic of Slovenia on review for possible further downgrade.

Slovenia´s banking sector is dominated by state-owned banks which control more than 40 percent of the market, while France´s Societe Generale, Italy´s Unicredit and a number of Austrian banks are also present. The Bank of Slovenia has said that the Slovenian banks´ financial results in 2012 are expected to be poor and that they will need further injection of capital. The growing risk that a new Slovenian government intervention to rescue the banking sector may be necessary, is one of the main reasons motivating the downgrades.