E/B/R ECONOMIC AND BUSINESS REVIEW Post-Socialist City: Competitive and Attractive Guest Editor: Irena Ograjensek Assistant Guest Editors: Tamara Pavasovic Trost and Lejla Perviz E/B/R ECONOMIC AND BUSINESS REVIEW | VOL. 17 | No. 2 | 2015 | 157-163 159 CONTENTS 159 Irena Ograjensek Challenges of Urban Revitalisation in the 21st Century: The ReNewTown Project Perspective and Beyond 165 Tomi Deutsch Planning and Monitoring of Urban Development: The Role of the Housing Price Index 185 Magdalena Szmytkowska Klaudia Nowicka Neo-Liberal Reality in Post-Industrial Waterfronts of the Post-Socialist Cities: The Polish Tri-City Case 203 Christina Götz Ian Cooper Krassimira Paskaleva-Shapira Small-Scale Projects and Their Potential for Urban Regeneration: Experiences from Eastern Germany 223 Naja Marot Youth: The Motor of Redevelopment in Mid-Sized Post-Industrial Towns 243 Jana Barvtkova Jizni Mesto As a Place to Live From the Perspective of Two Generations of Its First Inhabitants E/B/R ECONOMIC AND BUSINESS REVIEW | VOL. 17 | No. 2 | 2015 | 159-163 159 CHALLENGES OF URBAN REVITALISATION IN THE 21ST CENTURY: THE ReNewTown PROJECT PERSPECTIVE AND BEYOND IRENA OGRAJENSEK1 JEL Classification: R11 The project with the title New Post-Socialist City: Competitive and Attractive (in short the ReNewTown project: http://www.renewtown.eu) was implemented through the Central Europe Programme co-financed by the European Regional Development Fund in the period April 2011 - March 2014. Its primary focus was on reduction of disparities and improved quality of post-socialist urban environment (not only by positive transformation of residential landscapes but also by improved quality and accessibility of public spaces, increased provision of cultural and social events, increased support of entrepreneurial initiatives, strengthened identity, creation of common values, etc.). To this end four pilot actions (project investments) were implemented in post-socialist cities of four different Central and Eastern European countries: - ArtZONA in Krakow (Poland): http://www.renewtown.eu/artzona-krakow.html. - Centre for small and medium enterprises in Prague (Czech Republic): http://www. renewtown.eu/smes-prague.html. - Museum of socialist curiosities in Hnust'a (Slovakia): http://www.renewtown.eu/mu-seum-hnusta.html. - Renovation of a public space in Velenje (Slovenia): http://www.renewtown.eu/renova-tion-velenje.html. In parallel to implementation of the pilot actions, numerous model approaches to socialist urban heritage revitalisation were identified in the process of both desk and field research. The collected cases from all accross Europe were organized in two openly accessible project databases: - Database of good practices: http://www.renewtown.eu/good-practices.html. - Database of initiatives: http://www.renewtown.eu/initiatives.html. The core six models of socialist urban heritage revitalisation are those directly related to the ReNewTown project key areas: - Improved provision of local cultural and social events. 1 Irena Ograjensek, University of Ljubljana, Faculty of Economics, Ljubljana, Slovenia, e-mail: irena.ogra-jensek@ef.uni-lj.si 160 E/B/R ECONOMIC AND BUSINESS REVIEW | VOL. 17 | No. 2 | 2015 | 160-163 159 - Improved public spaces between blocks of flats. - Provision of support for the development of small business operators in the area of blocks of flats. - Improved attractiveness of buildings from the socialist period. - Promotion of the local community involvement in events organized in its quarter. - New functions for structures from the socialist period. In addition to these, other models of socialist urban heritage revitalisation we managed to identify in the framework of the ReNewTown project focus on: - Use of voluntary work to improve post-socialist urban environment. - Improved awareness of the socialist urban heritage. - Improved energy efficiency of buildings from the socialist period. - Direct involvement of the local community in decision-making processes on urban development projects. - Shared maintenance responsibility between owners and users of buildings (not necessarily built during the socialist period but neglected during that time). - Improved attractiveness of buildings built before and intentionally neglected during the socialist period (1945-1989/1991). Further to model identification, we were also brought to acknowledge the fact that sometimes demolition of existing structures needs to pave the way for revitalization efforts. The main issue in such cases is the challenge to assign the proper content to newly created empty spaces. The project databases of good practices and initiatives served as the invaluable source of information for three core project publications. Each of them builds on the identified models; each from a different perspective, aiming at a different target groups. The so-called Handbook of Models with the title Post-Socialist City: A Role Model for Urban Revitalisation in the 21st Century (Ograjensek, 2013) was developed for institutions, groups and individuals interested in positive transformation of urban environment at national, regional, and municipal level. It features selected case studies of identified models' implementation from the Czech Republic, Germany, Poland, Slovakia and Slovenia, along with valuable lessons learned. These were obtained in in-depth interviews with individuals directly involved in models' implementation processes within their communities. The interviewees were not only given the opportunity to describe the positive apects of their achievements, but also to state what they would do differently were they to launch the same project from scratch. One of the more prominent examples from the Handbook, the story of the Slovenian post-socialist industrial centre Velenje, is further elaborated from the internal city marketing perspective in Ograjensek & Cirman (2015). In addition, the Handbook also contains a showcase of benchmark analysis comparing attitudes of people living in post-socialist cities (Slovenian cities of Velenje and Nova Gorica were used as illustrative examples) with the attitudes of adult population in a selected I. OGRAJENSEK | CHALLENGES OF URBAN REVITALISATION IN THE 21ST CENTURY: THE RENEWTOWN ... 161 country (in this case Slovenia) towards urban development (past, present, and future), trends in population and business development, as well as social responsibility, values, and happiness. A set of relevant questionnaires is available in the Handbook's Appendix. The benchmark data served as inputs into in-depth analysis of community satisfaction in post-socialist cities; both their factors and implications (Cirman & Ograjensek, 2014). The Transnational Manual for Urban Revitalisation (Hlavacek & Cingl, 2014) targets people who live in post-socialist urban environment. It offers inspiration and practical step-by-step guidelines on how to initiate and plan revitalisation activities using the bottom-up approach, secure funding, and start implementing creative solutions for positive urban transformation. The Transnational Development Strategy for the Post-Socialist Cities of Central Europe (Wçclawowicz, 2013) is a comprehensive text containing proposals for new urban policies, whose implementation seems vital in the post-socialist cities of Central (and Eastern) Europe but might also be applicable in the 21st century urban environment anywhere in the world. All three core project publications were presented and discussed at the ReNewTown Final Conference (http://konference.ef.uni-lj.si/renewtown/) which took place at the University of Ljubljana's Faculty of Economics in February 2014. The conference aimed to provide a broader perspective on the competitiveness and attractiveness of post-socialist cities in Central and Eastern Europe by establishing a forum for exchange between academic researchers, urban planners and decision-makers dealing with these issues in the framework of, and beyond, the ReNewTown project. At the conference, special attention was given new economic and social functions of post-socialist buildings, public spaces, estates and/or districts; identity of, and differentiation among, post-socialist urban settlements; as well as values, well-being and sustainability challenge in post-socialist urban settlements. Some of the ideas and insights from the conference are included in contributions to this special issue of Economic and Business Review. Tomi Deutsch (2015) analyzes the real estate market in Slovenia and selected Slovenian city municipalities in order to establish whether or not it is possible to use the Housing Price Index as an indicator of urban development. Magdalena Szmytkowska and Klaudia Nowicka (2015) deal with the problem of degraded post-industrial areas which characterize many post-socialist cities; in particular they focus on waterfronts. In their paper, they evaluate the directions of waterfront development in Poland. Christina Gotz, Ian Cooper and Krassimira Paskaleva-Shapira (2015) explore the potential of small-scale projects for urban regeneration, thus contributing to the scientific exchange about projects that are being implemented on the local level, by tackling the so- 162 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 cio-cultural dimension of urban life. Their arguments are built upon selected case studies from Eastern Germany. Naja Marot (2015) reveals the importance of the youth in the redevelopment process of any post-industrial region. The basis for her discussion are two surveys performed among the youth in the Slovenian Zasavje region and its central town of Trbovlje. Last but not least, Jana Barvlkova (2015) discusses the results of the qualitative analysis of in-depth interviews with respondents in their thirties (who as children at the age of 2-3 moved with their parents into the Prague housing estate Jižnl Mesto in 1977-1978 and spent their childhood and adolescence there) and with their parents. The dataset allows for analysis of phenomena and processes that have been typical of large housing estates across Central and Eastern Europe in the past thirty years. This special issue could not have been prepared without the support of very special people. I am much indebted to my Assistant Guest Editors, Tamara Pavasovic Trošt and Lejla Perviz, and to those of my colleagues who accepted my invitation to review submissions. Their careful work and insightful contributions are deeply appreciated. Special thanks go to Tomaž Ulčakar of the EBR Editorial Office for his continuous support during the entire editorial process. I hope you will find the special issue informative and inspirational. Irena Ograjenšek Guest Editor REFERENCES Barvíková, J. (2015). Jižm Mesto as a Place to Live from the Perspective of Two Generations of Its First Inhabitants. Economic and Business Review, 17(2), 243-25?. Cirman, A. & I. Ograjenšek (2014). Community Satisfaction in Post-Socialist Cities: Factors and Implications. Lex localis, 12(2), 255-270. Deutsch, T. (2015). Planning and Monitoring of Urban Development: The Role of the Housing Price Index. Economic and Business Review, 17(2), 165-184. Götz, C., Cooper, I. & Paskaleva-Shapira, K. (2015). Small-Scale Projects and Their Potential for Urban Regeneration: Experiences from Eastern Germany. Economic and Business Review, 17(2), 203-222. Hlaváček, P. & Cingl, M. (2014). Transnational Manual for Urban Revitalisation. http://www.renewtown.eu/ tl files/renewtown/docs/TNM document ReNewTown FINAL.pdf (accessed October 15, 2015). Marot, N. (2015): Youth: The Motor of Redevelopment in Mid-Sized Post-Industrial Towns. Economic and Business Review, 17(2), 223-241. Ograjenšek, I. & Cirman, A. (2015). Internal City Marketing: Positive Activation of Inhabitants Through Supported Voluntarism. Ekonomski vjesnik, 28(spec. iss.), 139-152. I. OGRAJENSEK | CHALLENGES OF URBAN REVITALISATION IN THE 21ST CENTURY: THE RENEWTOWN ... 163 Ograjensek, I. (Ed.) (2013). Post-Socialist City: A Role Model for Urban Revitalisation in the 21st Century. Handbook of Models. ReNewTown Project. http://konference.ef.uni-lj.si/renewtown/wp-content/uploads/ sites/3/2014/03/HandbookOfModels.pdf (accessed October 15, 2015). Szmytkowska, M. & Nowicka, K. (2015). Neo-Liberal Reality in Post-Industrial Waterfronts of the Post-Socialist Cities: The Polish Tri-City Case. Economic and Business Review, 17(2), 185-202. Wçclawowicz, G. (2013). Transnational Development Strategy for the Post-Socialist Cities of Central Europe. http://konference.ef.uni-lj.si/renewtown/wp-content/uploads/sites/3/2014/03/TransnationalDevelopmentStrat-egy.pdf (accessed October 15, 2015). E/B/R ECONOMIC AND BUSINESS REVIEW | VOL. 17 | No. 2 | 2015 | 164-163 159 164 E/B/R ECONOMIC AND BUSINESS REVIEW | VOL. 17 | No. 2 | 2015 | 165-163 159 PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING PRICE INDEX TOMI DEUTSCH1 ABSTRACT: In this paper the real estate market in Slovenia and selected Slovenian city municipalities is analyzed with the goal of establishing whether or not it is possible to use the Housing Price Index as an indicator of urban development. The analysis shows that the real estate market in the Slovenian city municipalities has in recent decades been subject to a number of changes with a long-term effect. The analysis further proves that under certain conditions the Housing Price Index can serve as one of the indicators policy makers could use in planning and monitoring of urban development. Keywords: city municipalities, Housing Price Index, post-socialism, real estate market, Slovenia, urban develop-JEL Classification: R31 1. INTRODUCTION The Housing Price Index is basically designed to monitor trends in housing prices. Based on the positive growth in housing prices we can conclude that the demand for housing exceeds the supply, and that the area under observation has the potential for growth in the present and also in the future, as far as the latter provides a sufficient supply of housing units. This function of the Housing Price Index becomes particularly articulated in situations where purchasing a housing unit is the only real option for the solution of the housing problem in a particular area. Since we can assume that the real estate market is more vibrant in circumstances where the area prospers, or at least has the possibility to prosper in the future, this index can also be proposed as of the key indicators of current and future development, and can be used when designing appropriate development policies. The main objective of this paper is to analyse the real estate market in Slovenia and selected Slovenian city municipalities in order to establish the applicability of the Housing Price Index as an indicator of urban development. The trends in housing prices are analysed in a broader context, taking into account many factors that co-shape the housing prices. 1 University of Ljubljana, Faculty of Economics, PhD Student, Ljubljana, Slovenia, e-mail: tomideutsch@ gmail.com 166 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 In this way the information on the trend of housing prices in Slovenia and selected Slovenian city municipalities is as comprehensive as possible. Apart from the introduction, the paper consists of four sections. Section 2 explains the development of the Slovenian real estate market in the last few decades. It is a period marked by pronounced fluctuations in housing supply and important changes in the housing ownership structure. Section 3 describes the methodology and data used in the analysis of the real estate market. Section 4 presents and discusses the results of the real estate market analysis in Slovenia as a whole and in the selected Slovenian city municipalities. For Slovenia as a whole, prices of single-family houses and prices of housing units in apartment buildings are analysed for the period from 1 January 2007 to 30 June 2012. For the selected Slovenian city municipalities, the analysis is made for housing units in apartment buildings, which are the dominant type of housing in the Slovenian (post-socialist) cities. The final section summarizes the main findings and discusses implications that these have for policy-making. 2. SLOVENIAN REAL ESTATE MARKET IN THE HISTORICAL PERSPECTIVE 2.1. The Ownership Structure Change in the political system 25 years ago instigated a number of changes in the Slovenian real estate market, which - due to the absence of effective housing policies - are affecting the real estate market even today. Besides the high rate of single-family houses constructed for own use in the time of Yugoslav socialism, changes mainly occurred in apartment buildings, which represent a significant share of the housing stock in Slovenian post-socialist cities. Until 1991 the latter type of housing was mostly common or public property for rent, and did not generate particularly high costs for users. Prior to 1991, the social housing stock represented approximately 33 percent of the total housing stock in Slovenia. Tenants normally paid only symbolic rents, which did not even cover the maintenance costs (Stanovnik, 1994). Due to privatisation of this housing between 1991 and 1993, approximately 100,000 of these rental housing units were »transformed« into owner-occupied housing through a sale to the tenants at a substantial discount (Stanovnik, 1994). Since the location of this housing was not taken into account as a criterion in setting the price, some housing in elite locations (e. g. in the centre of Ljubljana) was sold at prices that reached only 10-15 percent of the market value (Stanovnik, 1994). Privatisation with such a large discount was also carried out in other Central and Eastern European countries (Stanovnik, 1994). In neighbouring Hungary, for example, housing units were sold to tenants at 15 percent market value, with a possibility for an additional 40 percent discount (Kovacs & Hervert, 2011), which is quite identical to the situation in Slovenia. The privatisation led to the transformation of the housing stock ownership structure in the cities, but it was geographically not evenly distributed. During the mass privatisation, purchases of the housing units occurred mostly in those municipalities where housing T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 167 was more attractive for the market and where residents had higher and more stable incomes (Stanovnik, 1994). Although there were also those to whom the real (market) maintenance costs represented an excessive burden among the new housing owners, these new owners are certainly the big winners of the transition, since they gained potential profit of 80 to 90 percent of the housing value. In later years, this profit further increased due to the growth of the housing prices. From the findings of Stanovnik (1994) it can be deduced that after the privatisation was completed, market- and probably quality of living-inferior housing, which was used by economically weaker tenants without gaining any potential profit, stayed in public ownership. In contrast to the cities, the ownership structure of housing in other areas of Slovenia did not change significantly in the transition period. In other words: the transition itself did not significantly impact this part of the housing stock. Single-family houses were in most cases built individually: it was the individual investor who, along with family members, has been using the house after completion of construction. According to the available statistics (SORS, 2015), the number of housing whose investors are individuals remained rather constant in the period before and after the change of the political and social order. Therefore, for a significant number of the population, i.e. the vast majority of non-urban population, living circumstances have not changed with the transition. Since this housing was in private ownership before the transition, their owners did not gain any potential profits due to the difference between the purchase and the market price, but only potential profits due to the increase in real estate prices. Potential profits from the sale could have been expected for at least three reasons. Firstly, because of the housing stock privatisation, housing supply was passed from the state to the individuals. Secondly, because in parallel with the privatisation of housing stock, construction and public property housing supply diminished, and thus the total number of available new housing units was reduced. And thirdly, because the individual constructions or single-family houses are in line with the new values of society and new trends, which set individualism before the common good. 2.2. New Housing Construction Characteristics New and used housing is sold (and rented) on the real estate market. New constructions include all housing, which will be passed to the use of first users after its completion, regardless if the housing was completed just before the start of use or a few years earlier. Multiannual delay can occur when the investor puts housing that is not interesting for the potential buyers on the market, but does not respond to poor or nonexistent demand by lowering the prices. Used housing on the real estate market includes all housing which will after some time of use be passed to a new user. This housing is generally older, although situations, where due to the rapid resale the used housing was built later than the housing that has a status of a new construction on the market, are known. 168 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 Simplified definitions that make the categorisation of housing easier also exist. For example, GURS (2013) considers all housing that was built in the last three years prior to the date of sale as new constructions. Regardless of the definition, it is considered that new constructions supply on the real estate market depends on the number of housing completed in a shorter period prior to the date of purchase, while the completion period of existing housing is longer and spans through more decades. Figure 1 shows the number of completed housing units in Slovenia in the period from 1970 to 2013 according to the investor. Completed housing where the investor is an individual (natural person) generally consists of single-family houses, which were constructed for own use. Legal entities (legal persons) on the other hand invest both in single-family houses and in apartment buildings, which are intended for the market. In the latter case, we witness a change: in the socialist period, legal entities mainly invested in apartment building. After the change of the political and social order, much more of their investment has been focused on the construction of single-family houses because of their search of competitive advantages on the real estate market. Figure 1: Number of completed housing units according to the investor ■ natural person E3 legal person Source: SORS, 2015. In general, construction of housing for the market with legal entities as investors has experienced a few ups and downs in recent decades. From 1970 onwards there were two prominent building cycles in which a larger number of housing intended for the market was built. The larger cycle took place in the time of socialism, before the transition, and the smaller one much later, a decade after the transition begun. In the time of socialism a significant number of housing was completed every year, most of it in the years from 1974 on. Mass construction of such housing began to decline in the second half of the eighties of the 20th century and has virtually stopped with political and social changes at the beginning of the nineties. In the decade that followed, the number of housing constructions financed by the legal entities is so small that it does not play any significant role for the real estate market in Slovenia. Revival of the housing construction for the T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 169 market began in 2002, soon experienced the peak and then dropped to the level at which this type of construction persisted for a decade before the rise. In relation to the structure of the housing for the market, the second construction cycle was slightly different than the first one, because - as already stated - the legal investors which build housing for the market adapted to the new market conditions by increasing construction of individual single-family houses. This change in the structure of housing constructed for the market probably also affected a slight decline in those housing constructions where investors are individuals. The new single-family houses supply slightly slowed down the construction for own use or started to successfully replace it. Regardless of this perceived trend of decline in construction for own use, it can be argued that construction of housing by individuals was rather stable over the decades until the last economic crisis from 2008 onwards, when together with the total number of completed housing for the market the number of housing built for own use also declined. After the onset of the crisis financial capacities of the population apparently became too small both for purchasing as well as for housing construction for own use. The number of completed housing in the last two years of the analysed period suggests this was the biggest crisis in the Slovenian housing supply in the past few decades. 2.3. Current Real Estate Market Supply and Demand Imbalance Insufficient and inappropriate housing supply coincides with insufficient housing demand. After the transition, the conditions for acquiring appropriate housing in Slovenia have changed significantly. At the end of mass privatisation, the majority of the population with housing problem was forced to solve it with construction for own use (which is not an appropriate or feasible solution for all future housing users) or by purchasing housing at a market price. As Cirman (2006) noted, people are forced to acquire owner-occupied housing because they do not have appropriate available rental alternatives. Due to insufficient supply, prices of available housing, both of new constructions and existing housing, are too high for average purchasers. In order for Slovenia to meet the needs for housing, between 11,000 and 16,000 housing should be completed annually (Banovec, 2005), which is significantly above the actual number of completed housing. Despite the housing prices being significantly above the purchasing power of an average housing purchaser, purchases still occur. One share of these purchases can be explained by appropriate purchasing power of a certain part of the population, another by excessive credit loads, and yet another large one by intergenerational help. As a response to the fierce conditions in the real estate market, intergenerational family financial transfers (transfers from parents to children) for housing purchases have increased after 1991 (Cirman, 2008). It is not irrelevant that a significant share of the generation that was capable of providing intergenerational help in the last two decades purchased their own housing under favourable conditions at the time of mass privatisation and was therefore not been financially incapacitated by this purchase. It can be expected that so created surplus of capital in a certain part of the Slovenian population will disappear over time, so a partial decline of such purchases in the future seems realistic. 170 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 Besides the intergenerational help in form of financial help with the housing purchase, two or more generations residing together in the same housing unit is also an important buffer of a non-functional real estate market. Young people, if they have this option, due to their inability to enter the real estate market, remain living at home - they delay moving out for a certain period of time or even continue living with their parents permanently. In case they form their own family, the extended stay may continue at the parents' of one of the partners. This alternative allows young people to solve their housing problem completely independent of the real estate market. Extended stay of individuals with their parents will normally not be affected by the size of the apartment, while the family stay with the parents of one of the partners is more or less possible only with a slightly larger apartment. To a greater extent this option is used by those young people whose parents live in houses that were built for their own use and were typically oversized (they are much larger than the typical single-family houses built for the construction market in the last construction cycle). Slovenian statistical data show that both the share of young people who live with their parents alone, as well as the share of young people who live with their parents together with a partner and/or children, have significantly increased in the post-socialist period (Kuhar, 2013). Between 2007 and 2011, the share of young people in Slovenia who live with their parents additionally increased; in comparison with the other EU countries, the growth of this group of young people was higher only in Hungary (Eurofond, 2014). An increase in temporary or even permanent postponement of the entry of young people to the real estate market has therefore occurred in the time of transition and during the last economic crisis, during periods of a decline in housing construction and deteriorating financial situation of the population. As extended stay with parents, whose longevity increased during the transition period, was not reduced by the recent construction cycle, we cannot expect any significant improvements during and after the next construction cycle. Similarly to Slovenia and Hungary, with the latest crisis, the position of young people in the real estate market has deteriorated also in the majority of other post-socialist countries, especially in Poland and Lithuania (Eurofond, 2014), suggesting that the impact of the transition on the real estate market persists. Position of young people in the real estate market is also deteriorating in the Western Europe. Although the changes there were not so radical, increased role of the market in the housing supply can also be determined (Pichler-Milanovich, 2001). Therefore, in Slovenia, as elsewhere in Europe, an increase in the share of owner-occupied housing and predominantly market housing supply can be observed. Such market model can only function with a proper housing supply, as well as with the ability of residents to generate demand for this housing. Data show that the real estate market in Slovenia is not functioning optimally, that the supply of housing is far below the satisfactory level, and that the population to a great extent solves its housing problems through the available mitigation measures. In the non-urban areas, where there are mostly large single-family houses, co-residing of young families and parents of one of the partners will prevail further into the future. In the cities, financial help of the parents in purchasing available smaller (compared to single-family houses) used housing will be dominant. Following from Figure 1 in the previous subsection, in most cases the subject T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 171 of purchase will be a housing unit which was built in the last 25 years before the transition. Considering the needs, the number of housing units completed after this period is almost negligible. 3. USE OF THE HOUSING PRICE INDEX IN THE REAL ESTATE MARKET ANALYSIS: METHODOLOGY IN THE SLOVENIAN CONTEXT 3.1. Data Source and Data Quality The Real Estate Market Record is »the first and only systemic data source for systematic monitoring of realized contract prices of the real estate in Slovenia« (Perovsek, 2009) and as such represents the basis of all other, also officially published, data on the prices of real estate in Slovenia. The constraints faced by the analysis in this paper, are therefore to some extent the general constraints pertaining to the use of these data. Given that the Real Estate Market Record was completely re-established, the quality of data in the database from the initial period onwards is (as expected) not the best. However, the changes that have been introduced after the database was established (GURS, 2013) should improve the data quality and enable more detailed analyses in the future. For the purposes of this analysis, the available data for the analysed period (1 January 2007 — 30 June 2012) can be deemed appropriate although not optimal (GURS, 2008). Therefore, before the analysis a substantial number of transactions that are not the subject of the analysis (e.g. for non-residential buildings) were eliminated along with transactions for which the data were insufficient (particularly due the absence of real estate prices or the information on the size of the property) or transactions that were evidently incorrectly entered into the database. Additionally, all transactions where the sale of housing as a whole was not carried out; and a small number of transactions with the lowest and highest values were also eliminated. All in all, the eliminations of bad data were carried out very carefully in order to avoid any significant impact of deletions on the results of analysis. 3.2. Units of Observation and Basic Indicators Analysis of the real estate market is made for the territory of Slovenia and the territories of the eight largest Slovenian city municipalities (Celje, Koper, Kranj, Ljubljana, Maribor, Nova Gorica, Novo mesto and Velenje). The analysis is made for apartments in apartment buildings as well as single-family houses which were the subject of purchase contracts in the period from 1 January 2007 to 30 June 2012. Analysis of both types of housing is done only for Slovenia as a whole. Since the urban areas are dominated by the housing in apartment buildings, the analysis for these areas is limited only to this type of housing. This somewhat curtails the presentation of the Housing Price Index; it is presented only separately for each type of housing (in form of two subindices), thereby allowing greater comparability between the entire Slovenia and selected city municipalities. 172 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 The analysis is limited to the price and the size of the property, and excludes other property characteristics such as the age of the property, construction phase of the new construction and the size of the attached land. Average price per square meter and the average price for housing as a whole are calculated. Average prices are calculated using arithmetic and geometric mean. Next, quarterly chain indices are calculated using the first quarter of 2007 as a base. Indices are calculated both for the case where the unit is a square meter of the housing, as well as for the case where the unit is the housing as a whole. By expanding the range of possible calculations of the average prices and indices, we are increasing the possibility of an in-depth understanding of housing prices movements in Slovenia and in selected city municipalities over the analysed period. 4. ANALYSIS OF THE SLOVENIAN REAL ESTATE MARKET ACTIVITY 4.1. Number of Transactions Despite some limitations resulting from the elimination of certain transactions during the preparation of data for the analysis, the number of transactions is a rather good indicator of developments in the real estate market over time, and for comparisons between different types of transactions, since it can be assumed that the compilation of data is independent of the time of transaction and it does not affect the data structure. Figure 2 shows the number of transactions by quarters. Transactions involving housing in apartment buildings and single-family houses are shown separately. The total number of transactions included in the analysis for Slovenia as a whole and eight selected city municipalities is shown in Table 1. Figure 2: Number of transactions by quarters in the analysed period ■ housing units in apartment buildings 0 single-family houses T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 173 Table 1: Total number of transactions in the analysed period Area* Apartments in apartment buildings Single-family houses Total Slovenia 34,153 (100,0%) 10,148 (100,0%) 44,301 (100,0%) Celje 1,555 (4,6%) 196 (1,9%) 1,751 (4,0%) Koper 1,055 (3,1%) 275 (2,7%) 1,330 (3,0%) Kranj 1,482 (4,3%) 251 (2,5%) 1,733 (3,9%) Ljubljana 9,012 (26,4%) 876 (8,6%) 9,888 (22,3%) Maribor 4,006 (11,7%) 472 (4,7%) 4,478 (10,1%) Nova Gorica 610 (1,8%) 154 (1,5%) 764 (1,7%) Novo mesto 584 (1,7%) 164 (1,6%) 748 (1,7%) Velenje 1,314 (3,8%) 91 (0,9%) 1,405 (3,2%) * Names of cities denote the analysed city municipalities. Most transactions in the real estate market refer to apartments in apartment buildings. The ratio between both types of housing was maintained in all quarters, as well in the years 2008 and 2009, when due to the crisis a significant decline in the housing market turnover occurred. In urban areas, subject of most transactions were housing units in apartment buildings (57.4 per cent of all transactions involving housing units in apartment buildings took place in the eight largest Slovenian city municipalities). In other areas single-family houses were the subject of most transactions; in the eight largest Slovenian city municipalities only 24.4 per cent of all transactions pertained to single-family houses. Most transactions in the Slovenian real estate market were carried out for housing units in apartment buildings in urban areas, which suggests that in these urban areas the real estate market is more active than in other areas of Slovenia. This finding is further confirmed by a comparison of the number of completed transactions and the size of the housing stock in individual areas. According to SORS (2015) in Slovenia in 2013 there were 857,007 housing units in the housing stock, of which 284,655 housing units or 33.2 per cent of total housing stock is located in the eight largest city municipalities. At one-third share of the total housing stock, half of all real estate transactions falls to the eight largest city municipalities (22,097 or 49.9 per cent of all transactions in the analysed period), which means that housing units (especially in apartment buildings) in selected urban areas change their owner on the real estate market quite often. According to SORS (2015), in 2008, at the peak of the latest construction cycle, in eight largest city municipalities there were 3,470 housing units completed. This represents 34.8 per cent of all housing units completed in that year, while in 2013, in the same municipalities, there were only 522 housing units completed which amounts to 15.0 per cent of the housing units completed in that year. Enlargement trends or at least trends in renewal of housing stock before the construction decline were approximately evenly distributed between the larger urban and other areas, but have almost stopped with the decline of the latest construction cycle. Therefore, the housing stock in non-urban areas 174 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 will, after the end of the cycle, to some extent still continue to renew itself through the construction of single-family houses for own use, while in the urban areas its renewal is stopping. As already noted, mostly used housing will be traded on the real estate market, among which the housing built in the last 25 years before the transition will prevail. 4.2. Trends in Prices for Apartment Buildings and Single-Family Houses in Slovenia Extremely large fluctuations in the construction and supply of new constructions in Slovenia, especially in the larger cities, do not allow for analysis of real estate price trends over time, which would be based solely on new constructions. The housing price indices, which are calculated using data from the Real Estate Market Record - data which mainly relate to transactions involving used housing - are therefore probably the best approach to the analysis of the Slovenian real estate market. Analysis of these data could otherwise be improved using data of higher quality and also by weighting various categories of housing in the calculation of the overall index. Let us take a look at real estate prices trends in the analysed period using currently available data. These enable an appropriate weighted merging of housing in apartment buildings and single-family houses in the calculation of the overall residential real estate property index, but for the purposes of this paper, indices for both categories are shown separately. Figure 3 shows the quarterly index of housing prices in apartment buildings and single-family houses price index for the entire territory of Slovenia. The base period of the index is the first quarter of 2007 (as for all indices in this paper). Average prices were calculated as the arithmetic mean. With the indices in Figure 3 the average prices per square meter of housing are compared. In Figure 4 comparisons for housing as a whole are made; average housing prices calculated as the arithmetic mean are compared. Figure 3: The Housing Price Index, comparison of prices per square meter, Slovenia (arithmetic mean) T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 175 In the second quarter of 2012 price per square meter of housing in the apartment buildings was 1,577 EUR, which is almost 5 per cent above the base quarter price, when the price per square meter was 1,510 EUR. Unlike housing in apartment buildings, the prices of single-family houses relative to the base quarter fell substantially, with the biggest fall recorded in the second half of 2009. The square meter of a single-family house in the first quarter of 2007 cost 1,031 EUR, and in the second quarter 868 EUR, which is about 15 percent below the starting point. The square meter of a single-family house was from the start a lot cheaper than a square meter of a housing unit in an apartment building. By the end of the analysed period, this difference further increased. Figure 4: The Housing Price Index, comparison of housing prices, Slovenia (arithmetic mean) Two price indices used for comparison of average housing prices are in the analysed period much closer than two indices used for comparison of average price per square meters. There are two reasons for such a state of affairs. Firstly, the prices of single-family houses decreased much less than the prices of a square meter of single-family houses. And secondly, the prices of housing units in apartment buildings did not persist so much above the price in the base period as the price per square meter of housing did. These differences occurred naturally due to changes in the size of housing, which was the subject of transactions, both due to a decrease in the average size of housing units sold in apartment buildings as well as an increase in the average size of single-family houses sold. The average size of housing units in apartment buildings which were the subject of the real estate market transactions, decreased from 56.7 to 51.9 square meters during the first quarter of 2007 and the second quarter of 2012. The average size of single-family houses, on the other hand, increased from 129.5 to 147.3 square meters during the same period. 176 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 4.3. Trends in Prices for Apartment Buildings: Comparison of Slovenia and Selected City Municipalities When calculating average prices using the arithmetic mean all prices have equivalent weight, while when using the geometric mean, there is more emphasis on the lower prices. The price index used for comparisons of the average prices which is calculated as the geometric mean will therefore largely reflect trends in the prices of cheaper housing. Figures 5 and 6 show the difference caused by the selection of arithmetic or geometric mean, in Figure 5 for the calculation of the average price per square meter, and in Figure 6 for the calculation of the average price of housing units in apartment buildings. How large are the differences that occur in average prices due to the choice between arithmetic and geometric mean is shown in Table 2 (for the first quarter of 2007) and Table 3 (for the second quarter of 2012). Slightly higher index values in case where compared average prices per housing square meter were calculated as a geometric mean show a slightly higher growth in prices of cheaper housing units in apartment buildings on the Slovenian territory. But differences cannot be established for all areas of Slovenia. For Ljubljana, for example, both indices have almost the same value, which means that in the largest Slovenian municipality significant differences between cheaper and more expensive housing in apartment buildings did not occur. Figure 5: The Housing Price Index for apartment buildings, comparison of prices per square meter, Slovenia T. DEUTSCH | PLANNING AND MONITORING OF URBAN DEVELOPMENT: THE ROLE OF THE HOUSING 177 Figure 6: The Housing Price Index for apartment buildings, comparison of the housing prices, Slovenia •using arithmetic mean using geometric mean Table 2: Average prices in the first quarter of2007, housing units in apartment buildings Price (in Euro) Area* Number of Arithmetic mean Geometric mean transactions Housing Square meter Housing Square meter Slovenia 1,337 81,860 1,510 68,505 1,304 Ljubljana 352 127,470 2,364 119,152 2,291 Maribor 166 59,921 1,107 53,471 1,032 Kranj 78 83,092 1,596 79,711 1,558 Koper 23 114,767 2,170 112,230 2,137 Celje 47 51,951 991 44,768 903 Novo mesto 34 70,600 1,309 67,867 1,284 Velenje 40 51,345 883 48,083 858 Nova Gorica 28 94,403 1,514 90,939 1,470 * Names of cities denote the analysed city municipalities. 178 ECONOMIC AND BUSINESS REVIEW j VOL. 1? j No. 2 j 2015 Table 3: Average prices in the second quarter of 2012, housing units in apartment buildings Price (in Euro) Area* Number of Arithmetic mean Geometric mean transactions Housing Square meter Housing Square meter Slovenia 1,627 80,361 1,577 67,998 1,408 Ljubljana 417 120,789 2,301 109,679 2,232 Maribor 215 59,755 1,137 53,920 1,098 Kranj 67 84,190 1,689 79,373 1,646 Koper 55 107,217 2,277 100,487 2,209 Celje 62 55,468 1,147 50,827 1,095 Novo mesto 12 80,563 1,342 77,557 1,325 Velenje 35 59,228 1,161 54,430 1,136 Nova Gorica 36 78,147 1,619 74,537 1,572 * Names of cities denote the analysed city municipalities. Among the analysed city municipalities there are considerable differences in the prices of housing units in apartment buildings. Significant differences also occur between the average prices calculated as the arithmetic and geometric mean, which suggests that there are significant differences in housing prices even within individual city municipalities. Furthermore, there are also differences between the movement of housing prices and prices per square meter of housing units as shown in Figures 7 to 12. Figure 7: The Housing Price Index for apartment buildings, Ljubljana, arithmetic mean o o o- o o o o- o- o7 cy o- o o o- o o- o o o o- o o AAAA^^j^^^^CfjOl O) Ç) O C) rsyrv "v ""v '"v cS C? £ <§■ <5> <9 ß ßß S? & & £ Ä- i s-