Construction starts in Prague’s residential sector increased by 60 percent y-o-y in H1 to 1,163 flats. This, however, isn’t enough to cover record demand, fed by low mortgage rates of around 2 percent, according to a recent analysis by Lexxus. In the first six months of the year, 3,027 units were sold, leaving a mere 38 newly built units still up for grabs. Lexxus warns there will be no available flats left on the Prague market in just a few months. The lack of flats is pushing prices up similar to what was seen before the crisis hit in 2008. But while prices increased by 32 percent compared to 2008, wages in Prague grew by just 25.5 percent. “In 2014, half of the flats sold at prices below the CZK 50,000/sqm average. The present average stands at CZK 70,000 to 75,000/sqm. While this may not affect investors, it can force households to switch to rental flats or relocate out of Prague, because new flats in Prague will not be affordable for them anymore,” says Lexxus partner Denisa Višňovská. The Lexxus analysis also indicates that residential demand may slow, due to price increases, stricter mortgage rules and a limited offer of flats in development projects.
