In 2023, the Czech Republic saw the lowest volume of investment in real estate in the last ten years. It totalled EUR 1.36 billion (CZK 34.5 billion), down by a quarter year-on-year. However, despite facing a number of challenges last year, the real estate market in the Czech Republic remained relatively stable. This is according to the Trend Report 2024 of the Association for Real Estate Market Development (ARTN). Throughout last year, residential property construction declined and office construction in Prague stalled. However, a significant percentage of retail space was added and construction of industrial and logistics complexes also grew at a record pace.
The past year was not an easy one for the housing market, according to ARTN. Several factors pushed down demand from prospective homebuyers, including continued high inflation and related economic uncertainties, a year-on-year sharp rise in interest rates, slightly falling property prices and tighter lending indicators set by the central bank, it said. The situation began to improve in the second half of last year, ARTN said. Despite the slump in sales, property prices did not fall across the board, except for older properties in worse condition. On the contrary, new properties maintained their prices. Year-on-year, 2.9 per cent fewer flats were sold in the Czech Republic, the average price was CZK 97,785 per square metre.
No new office construction has started in Prague since mid-2022. Despite stagnant construction, the office market recovered from the 2021 slump last year, according to Pavel Kliment, vice chairman of ARTN and partner at KPMG. Vacancy rates averaged around seven per cent, which is a lower figure compared to foreign countries. On the other hand, he said, it is necessary to consider the real vacancy rate and how many people actually live and work in the offices. According to the report, demand for offices fell by three per cent year-on-year last year.
The Czech market added almost one million sqm of new industrial space last year, 22 per cent more than the five-year average. Although the vacancy rate of these premises was around two per cent, demand for them slowly declined during the year, mainly from foreign investors.
The reason for the record construction of industrial estates, according to the report, was the surge in online shopping that occurred during the coronavirus pandemic. Businesses were switching from brick-and-mortar stores to e-commerce and looking for warehouse space. Real retail sales fell last year, but the market recovered towards the end of the year, according to ARTN. Retail real estate was then the most traded asset in 2023, accounting for two-fifths of total investment. New space is being added mainly due to the construction of retail parks, which are expected to open in record numbers in 2024 and 2025.
ARTN experts’ expectations for this year are broadly positive, and according to the 80 association members surveyed, demand for real estate is expected to increase. The housing sector will be the most interesting for investors.
Source: ARTN and CTK
