Construction of 44,992 flats started in the Czech Republic last year, roughly 10,000 more than a year earlier. According to the Czech Statistical Office, the last time more construction was created was in 1990, when the number exceeded 60,000 flats.
The last time construction was carried out at a similar pace as last year was between 2006 and 2008, but the number did not exceed 44 000 then. In 2015, for example, only 26 thousand new flats were built.
Last year, developers and construction companies started building over 21 thousand flats in family houses and more than 17 thousand in apartment buildings.
Thousands more flats started to be built by modifying existing buildings, statisticians confirmed in their yearbook. Interestingly, 1,676 apartments were also made in non-residential buildings. Office buildings, for example, are being converted into flats after processing the necessary permits.
However, not all the buildings were completed last year. The number of completed buildings was similar to the previous year—around 35,000.
The average size of an apartment in an apartment building was 51 square meters, while in a family house, it was 91 square meters. The size of flats has not changed significantly in recent years.
“Developers have reacted to the long-term high demand for new flats and houses with a delay due to bureaucratic obstacles to construction,” Petr Dufek, an analyst at Creditas, said.
He recalled that in recent years, flats have become sharply more expensive due to the mismatch between supply and demand on the market. However, the situation turned around this year when the Czech National Bank continued to raise the base interest rate to above six percent.
A downturn replaced the boom
“The pace of construction has declined significantly since June as developers have reassessed their plans at a time of expensive financing, declining availability of mortgages, and generally high uncertainties,” the economist pointed out.
He said residential construction is now going through a downturn, which will put a damper on the potential decline in new home prices. Dufek expects a more pronounced decrease in the price of older flats, especially those with high energy consumption.
“For new flats, developers may try to support sales with promotions in the form of free equipment offers, advantageous parking, and the like,” the economist believes.
The sales figures indicate the fact that demand has cooled significantly. According to Ekospol’s analysis, only 410 new apartments were sold in Prague in the third quarter of this year, which is 69 percent less than in the same period last year and the worst result in 15 years. According to other estimates, demand for new apartments in the Czech Republic has fallen by up to 80 percent year-on-year.
At the end of the year’s first half, 14,400 flats were under construction in the capital. This is 4,000 more than a year ago.
“Another 4,200 new flats are expected by the end of the year. The supply of new Prague flats will thus be the largest since 2017. Compared to the year’s second half, the offer prices in new buildings increased by only one percent to an average of CZK 124,887 per square meter excluding VAT,” summarised Blanka Vačkova from JLL.
“I believe that many of the newly constructed flats have already been reserved. After all, this is how it has always worked. Only individual developers know exactly how many remain unsold. In any case, some of the flats may go into the portfolios of rental properties, which are now experiencing a favorable period,” Dufek added.
Large developers are now postponing some ready apartment projects due to weaker demand or the high price of materials and work. “We are considering postponing some of the projects for a year or a year and a half,” Dušan Kunovský, head of developer Central Group, admitted at a November conference on the construction industry in Prague.
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