The real estate market is witnessing the resurgence of its longtime driving force. Individuals financing apartment purchases with mortgages three years ago comprised about half of the buyers. However, due to the increased costs of loans and stringent regulations by the Czech National Bank, they nearly vanished at one point, causing transactions to almost freeze. Now, the mortgage market is significantly revitalizing.
The latest numbers from the Czech Banking Association confirm this trend. According to the June edition of their Hypomonitor, banks issued 5,403 new mortgages, approximately 40% more than the previous year. This marked the third consecutive month when newly arranged loans exceeded 5,000. The total volume of new mortgages provided in May and June surpassed 20 million crowns per month, one of the highest in the past two years, according to Jakub Seidler, the chief economist of the Czech Banking Association.
Real estate firms have also noticed the return of buyers relying on mortgages. Statistics from the developer Central Group show that individuals financing their housing purchases with loans constitute about a third of their clients this year. Although this is still less than during the COVID-19 boom when mortgages were extremely cheap, it is significantly more compared to the past two years. For instance, in 2022, only about one-tenth of Central Group’s clients used a loan. The revival began in the second half of last year, and Michaela Váňová, the executive director of the developer, expects this trend to continue.
Interest in mortgages is growing despite banks’ slow rate reductions. The average June rate was 5.06%, 0.8 percentage points lower than the previous year. Banks have been reducing their rates more slowly than the Czech National Bank has been lowering its base rate. For a mortgage of 3.7 million crowns over 25 years, the June average translates to a monthly instalment of nearly 22,000 crowns.
Commercial financial institutions have recently slowed down their rate reductions despite the Czech National Bank continuing to lower rates. According to banks, this is mainly due to the cost of money on the interbank market. Experts point out that the reluctance to reduce rates may also stem from a desire to protect against potential client transitions to competitors. A newly approved fee, effective from September, is expected to limit this.
Higher mortgage rates are no longer as significant an obstacle for prospective apartment buyers. According to Marek Richter, head of mortgage services at Air Bank, the change in approach is partly due to fears of rising property prices. Data from the real estate advertising website Sreality indicates that property prices are gradually increasing. For example, in Prague, the average asking price for an apartment rose 7.7% year-on-year to 136,308 crowns per square meter in June. This means that a 70-square-meter apartment is offered for 9.5 million crowns. The same apartment costs about eight million crowns in Brno, nearly 13% more than last year.