Despite a cooling housing market, the Czechs borrowed CZK 217 billion for housing last year

Last year, banks and building societies granted housing loans in a total volume of about CZK 217 billion, representing 40 percent of the total volume in 2021, which was an extremely successful year in terms of housing lending. The market is thus returning to roughly the level of the years preceding this extreme increase.

According to experts’ expectations, last year’s results were affected by a significant rise in mortgage rates, inflation, and the ČNB’s retightening mortgage lending conditions.

The volume of mortgage loans granted last year amounted to CZK 163 billion, representing roughly 38 percent of last year’s mortgage loan volume. The importance of loans from building societies amounted to CZK 54 billion, half the previous year’s book. In total, people borrowed CZK 217 billion to finance housing, two-fifths of the volume of the highly successful year 2021, when people borrowed a total of CZK 537 billion.

“The year 2022 was marked by a significant cooling of the housing market. The period of extremely low-interest rates and rapid growth in house prices is over. The overall economic situation, combined with the ČNB’s regulatory measures, led to a slowdown in the market. We expect a similar development in 2023,” said Martin Vašek, CEO of Hypoteční Banka and ČSOB Stavební spořitelna.

The average mortgage amount also fell last year. While in the first quarter of 2022, its amount was CZK 3,221,010, in the fourth quarter, it was already almost half a million crowns less, CZK 2,760,000. The average mortgage amount in 2022 was CZK 2.98 million.

The highest mortgages are in Prague and Central Bohemia, where the average amount is CZK 3.55 million, and then in the South Moravian Region, with an average of CZK 3.16 million. In other regions, people borrow less than CZK 3 million on average.

There is interest in building savings

Building savings recorded a significant interest in concluding savings contracts last year. A total of 570 000 new contracts were completed, the highest number in the previous eight years.

At present, savings banks record around 3.2 million contracts in the savings phase and manage a total of CZK 336 billion deposited in them, representing seven percent of all household savings.

“This is the number one savings product for a large part of the public. In the long term, almost a third of Czechs have an active building savings contract. Interest in building savings is currently driven by interesting interest rates on savings accounts, but also by the availability of loans and their favorable rates compared to mortgages,” said Vlastimil Nigrin, a member of the Board of Directors of Hypoteční Banka and ČSOB Stavební spořitelna.

Sustainable living

Last year saw a significant cooling in the property market, especially in the year’s second half. Demand for purchasing houses and flats fell, and demand for holiday properties stalled.

This was reflected in a significant slowdown in property price growth. According to experts, the exception is land, where price growth slowed, but demand did not fall.

“High mortgage rates, in particular, hurt the market. This was reflected in a decline in demand for apartments and a slowdown in their price growth. For houses, demand shifted towards smaller and cheaper houses with solid fuel heating or newer energy-efficient houses,” added Vašek.

The significant increase in energy prices, which has and is significantly affecting the budgets of many Czech households, has increased the demand for energy-efficient housing.

This has also been reflected in the interest in profitable financial products supporting sustainable housing. “Interest in energy-efficient housing is showing a growing trend. This is reflected in demand for this property type and relevant financial products. In 2022, the ČSOB Group granted 2,161 mortgages for sustainable housing, an increase of 12 percent compared to the previous year,” added Vašek.

The year 2023, in the sign of stabilization

According to experts from the ČSOB Group, the market will continue to stabilize this year. In their opinion, inflation seems to have peaked, and its rate will gradually decline. The interest rates on mortgage loans are also expected to stagnate. In terms of the volume of mortgage loans granted, they expect the situation to stabilize at 2022 levels.

Experts also expect a continued recovery in the building savings segment, where the strong tradition of the product will be joined by attractive interest rates that will motivate potential savers. There will also be interest in loans from building societies, which people use primarily to finance home improvements and renovations.