During lockdown most of the business segments suffered due to lack of purchasing power. Meanwhile, apartment prices skyrocketed regardless of the general market situation. Experts believe there is no indication for the real estate market to plummet any time soon. The bubble keeps growing.
“High demand has actually been going on since the end of the first lockdown. No one expected such behavior from buyers, ” said František Brož, an analyst at CenovaMapa.org.
Czech Statistical Office confirmed that there has never been such a rapid price growth throughout years of previous monitoring. Older flats gained a 15% increase in market price alone in the first quarter. At the same time, the demand for new contractions hasn’t slowed down either.
“The current big wave of growth started around 2014 and is the fourth in the history of the Czech Republic since 1993. At present, on average, more intensive price growth can be observed in areas with lower prices, “commented Jiří Mrázek, Director of the CZSO Price Statistics Department.
Last year, those interested in a three-room apartment with a kitchenette had to prepare approximately 5.5 million crowns in Prague. If you want to buy the same apartment this year, you must prepare at least 600,000 extra crowns, according to the price list of the RE / MAX real estate network.
“According to data from the largest Czech real estate portal Sreality.cz last June, the average offer price per square meter for domestic smaller flats up to 45 m2 in good condition was around 64,600 crowns. In a year-on-year comparison with the first days of June this year, all indications are that housing prices in all regions continue to rise year-on-year. In Prague, we record an increase in offer prices of around 14 percent, “said Šarlota Smutná, data analyst Seznam.cz.
Prices are increasing in other regions as well,
“People are now willing to buy any property, even at a meaningless price. A year ago, studios were sold in our country for a maximum of 1.7 million crowns. We have now sold one of them for even 2.8 million, “said Petr Dufek, Bidli’s real estate manager for the South Bohemian Region.
A phenomenon on the market is investment purchases of flats outside Prague. Either for the purpose of further lease or reconstruction and subsequent sale at a higher price.
“Many smaller investors are heading to the regions, also due to a faster return on investment. To a certain extent, there is a greater risk in the regions that the investor will encounter an unreliable tenant, but investors buy and push prices even in long-term cheaper regions such as Most, Chomutov, Žatec or Louny upwards, “said real estate agent Pavel Hassman from RE / MAX 4 You.
According to the Czech National Bank, flats are sometimes overvalued by up to a quarter. Market overheating is curbed by interest rates, which the central bank has kept low for a long time. However, mortgage interest rates are already heading for a gradual upward path.
Notably, a siginificant chunk of investors buy new apartments in pursuit of saving funds from inflation.
“There is a huge interest from large multinational funds that want to invest in rental housing,” said Josef Wiedermann, CEO of UBM Development Czechia.