Investments in residential real estate were even more unfavourable in October than in September. This follows from data provided by UniCredit Bank to ČTK. Its indicator, which represents the net annual rental yield minus the average of interest rates on mortgages and government bonds, fell to minus 3.18 percent. According to the indicator, investing in residential real estate is no longer paying off.
The fall in the indicator was caused solely by the rise in 10-year government bond yields, which continued for the third month in a row, putting real estate at a disadvantage in the eyes of savers. Indeed, when yields on alternative safe investment assets such as government bonds rise, investors’ incentives to buy real estate decline.
In the eyes of the mortgage-burdened, the situation has improved slightly thanks to a slight cheapening of mortgages, and the scissors between them and savers have thus closed a little. Gross annual rental yields on the regional city average remained virtually unchanged month-on-month as a 0.7 per cent month-on-month rise in the asking prices of 60 sq m flats offset an identical rise in rents.
Properties in Ústí nad Labem and Ostrava continued to be the least attractive. At the other end of the ranking, Brno returned to the lead, followed by Zlín and České Budějovice. Month-on-month, the indicator fell in nine regional cities, most notably in Ostrava (down 53 points), Liberec (down 31 points) and Brno (down 28 points) due to a noticeable drop in rental prices and, in the case of Ostrava and Brno, an increase in apartment prices. The month-on-month growth of the indicator occurred mainly in Karlovy Vary due to the fall in apartment prices and the increase in rents.
The recovering real estate market has again somewhat dispelled fears or hopes of a sharp fall in prices, which will not happen without a trigger in the form of a deeper economic recession, said UniCredit Bank analyst Jiří Pour. Various contradictory factors will affect housing prices in the coming months, he said. Inflation and the associated rise in rents, postponed demand for owner-occupied housing and low construction will work in favour of rising apartment prices. On the other hand, high long-term interest rates will prevent more significant price increases, he added.
Source: UniCredit Bank and CTK
