Czech developers promise to build even more apartments and offices
According to Radio Prague, the conclusion about a seven-year period sufficient to become a new homeowner was made based on a study by Deloitte. It assumes that the average Czech salary is approximately 27,100 crowns (985 euros), and the cost of the purchased housing is about 2.3 million crowns (83,363 euros).
"Compared to other Central European countries, housing in the Czech Republic is one of the most affordable," says Petr Hana, a representative of Deloitte. "Our situation is better than in Poland or Hungary, but we find ourselves at a disadvantage when compared to some of our western neighbors with more developed economies, such as Germany or Belgium."
Residential property prices in the Czech Republic are expected to increase by 2.3 percent this year. Developers also promise that the range of choices will expand, but more on that later. According to Hana, prices are rising most rapidly in Ireland, where they have increased by almost a third compared to last year. Apartments are also becoming more expensive in Israel and the United Kingdom, while according to the same agency, housing in Russia has fallen by 16%. The reason is the current dynamics of the ruble exchange rate, particularly its weakening.
The trend of apartment price increases in the Czech Republic began last year. It is most noticeable in Prague, Brno, and the surrounding areas. Banks are still offering mortgage lending at unprecedentedly low interest rates. On one hand, this increases demand for real estate, and on the other, it drives up prices. However, the situation may soon change; some banks announced this week that they will raise mortgage interest rates.
"The current boom in real estate purchases here is certainly linked to low lending rates," suggests Lukáš Vácha, an analyst at Conseq. "I believe that if interest rates rise, which could happen within two or three years, a sharp cooling of the housing market can be expected."
Many of those whose incomes allow it are still buying housing as an investment. According to Libor Ostatek, director of Golem Finance, the purchase is justified because prices have not yet reached the maximum level recorded on the Czech market in 2008-2009. In any case, the prospects for the investment attractiveness of the housing market should be carefully analyzed.
According to information from the portal Sreality.cz, the most successful investment is the purchase of a classic one-room apartment with a kitchen or a studio with a kitchenette in the Ústí nad Labem Region. In this case, costs can be fully recouped in about 5.5 years of renting out the property.
Developers have planned to build more apartments, office buildings, and industrial facilities this year, so the supply of new apartments for sale in Prague, in particular, will increase by 6.2 percent, and offices by 12.7%. In 2016, developers will offer 4.1% more housing, as analysts believe demand for new apartments among Czechs will increase somewhat further. In other regions of the Czech Republic, the volume of residential real estate will increase by 2% in 2015 and by 1.9% in 2016, which will also affect its price.
According to the latest analysis of developer companies conducted to identify potential in the construction sector, the results of which were published this week by CEEC Research and KPMG Czech Republic, demand on the domestic real estate market currently exceeds supply. In the past year alone, for example, 5,950 new apartments were sold in Prague.