Real estate in the Czech Republic has long been at the top of the European ranking in terms of price growth. According to Eurostat, at the end of last year, although the price of Czech apartments and houses fell by one percent year-on-year, since 2010 they have risen in price by 123 percent. Even so, Czechs prefer ownership over renting. “It’s a legacy of communism, when our parents could only invest in houses. And they pass this on to their children,” explains Česká spořitelna chief economist David Navrátil.
MONEY TALKS
Prague
4:03 p.m April 25, 2024
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New apartments will become more expensive this year by less than five percent, according to the study of development companies H1/2024, prepared by the analytical company CEEC Research | Source: Shutterstock
New apartments will become more expensive this year by less than five percent, according to the study of development companies H1/2024, prepared by the analytical company CEEC Research. The main reason is the lack of supply and the revival of demand. Buyers are afraid of further price increases.
Is the real estate market waiting for further price increases? The Chief Economist of Česká spořitelna David Navrátil answers on the Money Speech program
“Five percent is a good guess. After several years when household consumption was falling, households will not reduce it and will be more willing to invest,” explains economist Navrátil. According to him, the demand will then start to increase, which will lead to the predicted increase in prices.
According to the latest Deloitte Real Index, apartment prices in large cities in the Czech Republic are already growing at a rate of almost seven percent. In Prague, compared to January, the average price for one square meter rose above 120,000 crowns.
“Last year, 39,000 new apartments and houses were completed. But in order to renew our housing stock, we would need 50,000 of them annually. I’m not talking about our population increasing every year. We are in one of the last places in the European Union in terms of the number of apartments per inhabitant,” points out Navrátil.
Six million for a small apartment
Despite falling mortgage and energy prices, owner-occupied housing is becoming less and less affordable. For example, an average apartment in Prague with a size of 50 square meters will cost six million. It is the smaller apartments that are most in demand.
At current interest payments, this represents approximately 30,000 per month for 15 years. However, Czechs still prefer ownership over renting.
In March, banks provided half as many mortgages year-on-year. Interest rates are the lowest since June 2022
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“It is a legacy of communism, when our parents could only invest in houses or cottages. And they pass this on to their children,” says the economist.
He adds, however, that even from the point of view of investments in the 1990s, real estate was remarkably profitable. It may also influence why real estate prices are now overvalued.
However, according to the economist, problems with availability can also be caused by investors who buy real estate. “It’s good if an investor rents an apartment, it will increase the availability of housing for younger generations or people with lower incomes,” Navrátil thinks.
“There is a lot of room for cooperation between the private and public sectors. A private person can rent an apartment at a discount so that the city is able to secure housing for professions such as nurses or teachers, which it needs for its function,” concludes economist Navrátil.
Has Czech membership in the European Union raised our standard of living? And would the introduction of dismissals without giving a reason even make sense in our country? Listen to the entire show in the audio recording above.
Václav Pešička, fos
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