Last year was marked by a significant decline in the housing market, with sales of new flats in Prague falling by 60% year-on-year. This was mainly due to expensive mortgages, whose interest rates increased almost threefold, and the CNB introduced strict regulation. The situation on the market became very complicated last year – while sales of flats decreased significantly, construction costs skyrocketed in connection with the war in Ukraine and the resulting crisis.
Investors reacted to the crisis by halting or postponing most of the projects in the pipeline. Also last autumn, Central Group announced the postponement of the construction and sale of more than 700 new apartments in its major projects Parková čtvrt’ in Prague 3 and Tesla Hloubětín in Prague 9.
“The demand for new apartments has recovered significantly this year. And over the next two years, we can expect a gradual reduction in mortgage interest rates to the psychological limit of 3%. By then, the monthly mortgage payment will roughly equal the monthly rent. At that time, we anticipate a significant new sales boom, for which we want to be prepared. That is why we are already planning a massive new construction of 1,600 new apartments,” says Dušan Kunovský, founder and head of Central Group.
The largest projects for which Central Group will select construction contractors this year are the 2nd stage of Tesla Hloubětín with 360 flats and the 2nd stage of Park Quarter with 370 flats. A completely new location for construction will be the large Harfa Living project in Prague 9, where Central Group will select construction companies for three apartment buildings with a total of 610 apartments. Other locations being prepared for construction are Chodovec, Dolní Počernice and Háje, with a total of 270 new apartments.
“The construction industry is now in a significant downturn, so we expect that this year we will be able to negotiate much better prices with construction contractors than they demanded in the last crisis year. Thanks to the fact that we have no loans, we will be one of the very few investors who will start building new projects at this specific time,” explains Kunovský.
Lower construction costs are a prerequisite for new housing construction to get back on track in a big way. Investors now have extremely expensive financing and also have to work with various costly marketing bonuses to boost sales. In order for it to make economic sense for them to build, there must be a significant reduction in construction costs.
