The rate of growth of household debt in Slovakia has been the highest in the EU for years, with Slovaks already overtaking richer countries in this respect. In 2015 the debt to income ratio of Slovak households already equaled that of the Czech Republic and overtook that of Italy a year later, according to VUB bank Chief Economist Zdenko Štefanides. "Last year, the debt-to-income ratio crossed the 70% threshold, and we are now looking at Germany or Austria for comparable levels," said Štefanides. In his opinion, the space for such a rapid growth in loans – historically provided by a low indebtedness among the population and a deferred demand for housing among a portion of it – is now closing. According to financial analyst Marián Búlik of OVB Allfinanz Slovakia, the availability of funding is still high. "Clients with stable employment do not have any problem getting new housing thanks to a loan," Búlik told the SITA press agency.
The Slovak Central bank, however, continues to tighten credit conditions. "A stronger emphasis on saving, and on providing some of the resources from their own savings, should have come a long time ago," said Búlik. According to Štefanides, the fact that the central bank limits the ratio between the amount of the mortgage loan provided and the value of the underlying property, and sets debt-to-income rules, mostly affects young people who have not yet managed to save. There are not many countries in Europe where the population is accustomed to being given a hundred percent mortgage as a matter of course. According to Štefanides, the weakening demography will also contribute to the slowdown in the market. Over the past five years, the category of the typical mortgage client aged between 25 and 44 has shrunk by about 3 percent. Over the next five years this decrease is expected to reach nearly ten percent. However, according to Búlik, the housing loan market is large enough to absorb a certain decline in lending without jeopardizing the stability of the banking sector. In his view, the shrinking of this category of typical mortgage clients is sufficiently balanced by the average loan amount, which has grown substantially in recent years. And, as a result of high housing and construction prices, this average amount is not expected to decline in the near future.
