Slovenia’s banking problems drag house prices down
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New bank lending has virtually ground to a halt in Slovenia, due to banking system problems. As a result, the house price increases during the first quarter of 2010, which were very small anyway, have not been sustained.
Slovenia’s mortgage market expanded rapidly from 2004 to 2008, largely due to strong economic growth and low interest rates. But many housing and consumer loans turned sour when the 2009 economic recession hit. Bad loans rose from 1.7% of the banks’ portfolio in 2007, to 3.2% in 2010, according to the Central Bank. Slovenia’s three biggest banks reported losses in 2010. As a result, bank lending almost ground to a halt during the last quarter.
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