Data from the real estate market point cautiously to a few things. The offer prices of properties fell slightly during the last year. But now they are growing again, they are already at the same level as at the beginning of 2023 and it seems that the trend is increasing. (source: CZSO) Not only the prices of new apartments on offer are rising, but also older properties with a good location.
It is possible to observe only minor price corrections for older properties, but these properties are decreasing on the market and most likely they too will start to rise in price soon. Apparently we can wait up to 15% growth during this year. Is the Czech real estate market really up and running and waiting for another year with double-digit growth?
Previous big growth does not mean the same this year
Much of these predictions are based on situations in 2020 and 2021. At that time, the prices of Czech real estate were growing at an unprecedented rate of tens of percent per year. After a slight correction due to the economic crisis in 2022 and 2023, it is thus expected that the real estate market could return to growth.
But let’s remember that a number of factors have changed over the past three years. First of all, it’s a question of money. There is currently no excess money in the market, as it has been since 2009, when, with minor exceptions, 2T CNB repo rate below 2% level. This long period of low interest rates, along with economic growth, high employment and an overall rise in living standards, meant that there was far too much free money in the market. Which, for the most part, investors placed on the real estate market.
Since then, however, uncertainty has increased in the economy, not only the foreign political uncertainty, but also a certain uncertainty of households, which began to save more and which, thanks to high inflation in recent years have lost a large part of their real income. The data also suggests that unemployment could start to rise and that it will cross the 4% mark this year. All this increases the uncertainty of households when buying their own housing. And perhaps even a little more uncertainty increases when it comes to buying an investment property.
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15% for 2024?
Is it really realistic that real estate prices will rise by 10% or more this year? That is, on the condition that the CNB further relaxes monetary policy and that the competitive struggle on the mortgage market accelerates the reduction of commercial rates? It is not certain. Although it is easy to predict, the reality may be different.
Real estate prices will almost certainly continue to rise. That will be the main influence slow process of approval and construction of new properties. After all, this fundamentally influenced prices on the real estate market in previous periods as well, and it remains such an evergreen of the Czech real estate market. However, the demand for real estate may not reach the same frenzy as it was in 2020 and 2021. Sometime after the publication of an ad for sale, the property had several interested parties and often already buyers.
The supply side is likely to be more cautious. After all, mortgages are still quite expensive. A 2% interest rate is still a long way off. And if unemployment starts to rise, then someone better think twice. Real estate prices will probably continue to rise, but most likely it will not be as dizzying as it appears at first glance.
