Rents are on the rise given the decline in sales of freehold flats, and the latest edition of a study of the Czech real estate market by the Association for Real Estate Market Development (ARTN) and a discussion meeting in Prague yesterday showed that investor interest in buying projects is starting to pick up after last year’s downturn.
The Association of Rental Housing (ANB) estimated for CTK that large investors, including real estate funds and developer activity, will acquire around 2,000 apartments in 2021, up from less than half last year. “But in 2023, together with a slight decline in apartment prices and growing interest from tenants, I sense a growing trend again,” said ANB vice president Stanislav Kubacek.
In the Czech Republic, according to available data, about 22 percent of the population lives in rental housing, while in Western Europe the figure is much higher. In Germany and Austria it is more than twice as high. Due to expensive mortgages and high inflation and house prices, apartment sales slowed down in the second half of last year and many developers are talking about rental apartment projects.
Some are planning their own portfolio of rental apartments, while others are negotiating with institutional investors. Penta Investments is interested in buying a project with about 70 apartments. “This is a test for us, we are talking to the investor about what he wants and to what extent we are able to satisfy him,” said Petr Palička, managing director of Penta Real Estate. He added that the space for rental apartments in Prague is huge.
Trigema, for example, wants to have 1,000 of its own apartments for rent and is currently negotiating the sale of about 100 apartments in the fund. Marcel Soural, head of the company, said that institutional investors will be most active in the first half of 2023. “They know very well that now is the time to come to developers and buy the building they want. It will be part of the spring market recovery, which will show up later,” Soural added.
In the Czech market, foreign institutional players have the upper hand so far, according to Martina Jůzová, real estate business manager at Česká spořitelna. These include Sweden’s Heimstaden and Germany’s Zeitgeist Asset. The latter said last summer that it plans to more than double the value of its portfolio in the Czech Republic over the next three years to almost EUR 500 million (CZK 12 billion).
“We need to change the perception that it would have to be only foreign investors, but why not some domestic insurance companies. Unfortunately, the legislation does not allow that yet,” Jůzová said.
The insufficient volume of flats for rental housing is also behind the increase in rental prices in Prague, which have risen by a quarter year-on-year. The ARTN analysis shows that the usual rental price in the capital is between CZK 300 and CZK 400 per sqm for older apartments, while in the case of new buildings it is CZK 400 to 500 per sqm. Institutional offers have risen to CZK 537 per sqm and there are also prices above CZK 600 per sqm. “And there is still room for growth,” Soural said.
The portfolio of rental housing projects may also be more variable. More types of entities will be involved in building or owning rental apartments. The state also wants to encourage municipalities to build them, and the Prague Archbishopric has already announced it will invest in 1,000 rental housing units. “For the first time there will be rental projects targeted at families and long-term rentals,” said Pavel Velebil of TIDE Reality.
Source: CTK
