A newly published analysis by Silverline Real Estate shows that over the past 10 years there has been a supply deficit of around 80,000 apartments in the regional cities of the Czech Republic. Prague has the main share of the deficit with 44,000 apartments, but the pace of construction was not enough to meet the demand in any of the Czech regional cities. Inhabitants are settling more in the outskirts of cities, which brings additional problems for transport infrastructure and civic amenities. The analysis uses fresh Czech statistics office (ČSÚ) data from the population, house and apartment census.
Development of demand and supply of new apartments:
The demand in regional cities over the last decade (2012-2021) reached 181,000 new apartments, an increase of 71% compared to the previous decade (2002-2011). Almost half of the demand arose in Prague, but the growth rate was overtaken by cities in the regions; in Prague, demand increased by 48% compared to the previous decade, in other cities by an average of 109%. Ostrava recorded the strongest growth in demand in relative terms.
In contrast, the construction of new apartments (supply) fell by 12% over the same period, from 106,000 to 93,000 apartments. Construction increased only in Olomouc and Pilsen, and remained similar in Ústí and Ostrava, falling sharply in the other cities. E.g. in Liberec, construction fell by 56% between decades, in Hradec Králové by 27%. Both Prague and Brno were on the national average with a 12% drop in supply.
The difference between the number of apartments in demand and those built does not sound positive at all for local residents. We see that over the last decade the number of completed apartments in all regional cities was not even enough to cover the demand in Prague itself, to saturate the demand of all regional cities would require double the construction,” comments Dan Vaško, CEO and co-founder of the fund, on the analysis.
What awaits us next?
Compared to the last record decade, a slight decline in demand can be expected, mainly due to a slower decline in household size. The equilibrium state of total demand in regional cities will be ~120-130 thousand new apartments per decade. However, this volume still exceeds the current pace of construction by more than a third. In addition, cities will carry a significant housing deficit for decades to come.
“Further construction will be most essential in Prague, Brno, Pilsen, Olomouc and Liberec. These regional cities currently lack the volume of apartments at the level of 5-10% of their total housing stock, which requires a quick construction solution,” adds Martin Benroth, co-founder and investment director fund. “In Brno, for example, in order to compensate for the current deficit, 3,000 apartments per year should be built in the next decade. The average construction there in the last 20 years has not even reached 1.5 thousand apartments per year, and the current prospects do not count on a significant increase in construction. Considering due to the limited possibilities of internal development areas, we can expect an expansion of construction beyond the current territorial boundaries of the city, and therefore continued pressure on the price of surrounding land.”
Source: Silverline Real Estate and CTK
