The growth of residential real estate prices should slow sharply in the second half of this year. This follows from the real estate market tension indicator, which is compiled by Unicredit. The profitability of investments in residential real estate is again lower month-on-month in March, according to Unicredit Bank.
UniCredit Bank analyst Jiří Pour said that high interest rates, together with low rental yields and new restrictions by the Czech National Bank (CNB) on the provision of mortgages, will reduce demand on the real estate market and slow down real estate prices. The new restrictions apply from April.
“Bets on the continuing rise in property prices and fears of a continuing deterioration in housing affordability may continue to fuel the overheated real estate market, but I expect these braking factors to take hold in the second half of the year and real estate price growth to slow quite sharply,” Pour said. He added that the available data from the real estate market on the Realitymix.cz portal so far show the continuing inflation of the real estate bubble.
“Rent profitability at the Czech level after adjusting for the expected fixed annual wear rate fell by five points month-on-month to 1.39 percent due to rising real estate prices with stagnant rental prices, and thus did not even reach interest rates on savings accounts, where today can be without any conditions get a more interesting return,” said Pour.
According to Pour, strong growth in government bond yields further disadvantaged the purchase of an apartment in the eyes of savings owners, while mortgage rates rose at a slower pace. “Although mortgage rates and government bond yields have had the strongest growth, they have probably not reached their peak yet and the war in Ukraine may bring further surprises to the markets,” Pour added.
Of the regional cities, the properties were “least unfavorable” in Ostrava, Olomouc and Ústí nad Labem, while at the opposite end of the scale are Brno, Prague and Plzeň with the least advantageous properties.
The indicator fell month-on-month in all regional cities, most notably in Olomouc (by 72 points to -1.62 percent), Jihlava (by 60 points to -2.49 percent) and Liberec (by 54 points to -1.85 percent). In all these cases, according to UniCredit Bank, the cause (apart from the rise in interest rates) was the month-on-month decline in rental prices and the rise in apartment prices.
Source: Unicredit Bank and ISBnews
