The market for ordinary real estate was more or less frozen last year due to deferred buyer demand resulting from high housing prices, huge mortgage rates and insufficient supply. In contrast, the segment of exclusive properties in premium locations is much more stable. However, it also experienced continued stagnation in the first half of the year and only revived in the second half of the year. The premium clientele also waited and put downward pressure on sellers. Luxent Exclusive – Properties predicts that the trend of rising demand from the end of the year will continue this year. The current market will be helped by the expected slight drop in interest rates. High-end luxury properties will continue to sell well and their prices will rise. However, buyers’ demands on the quality of properties and real estate services will increase. According to Luxent’s analyses, there will definitely be continued interest in exclusive holiday villas and apartments abroad.
“The year 2023 ended better for us commercially than it started. For most of the year, the real estate market was stagnant and this unfavourable situation was logically reflected in the realised transactions. There was no increase in the financial volume of properties sold or in the number of transactions. We were successful in selling entire development projects, building land, agricultural and forest land, and growth was generally maintained by foreign properties. It was only at the end of the year that we saw renewed interest in domestic holiday properties, the segment of which was otherwise virtually frozen throughout the year. However, the positive trend of the last few months, when the overall demand for real estate began to rise, points to an optimistic development this year,” says Emil Kasarda, the owner of Luxent – Exclusive Properties, assessing the past year from the perspective of the real estate agency.
According to the real estate agency’s data, the greatest interest was on the one hand in smaller units of the 2+kk type intended for rent and on the other hand in above-standard flats of 4+kk and larger in quality projects and good locations. Highly exclusive villas in the most attractive locations were also in high demand.
Sales of luxury properties only picked up in the second half of the year.
In terms of demand, the 2023 real estate market can be characterised as more or less frozen. In fact, the stagnation from the second half of 2022 continued into the early summer of 2023 and even made its way into the exclusive real estate sector. “During July and August, we saw only a sporadic recovery. This changed in the autumn, when demand started to clearly awaken. This saw a 22% increase in September and October, and this upswing was reflected in the growth in the number of concrete deals. Logically, this was then reflected in the number of transactions concluded. At the end of the year, the trend of increasing demand continued,” summarizes Jiří Kučera, director of Luxent – Exclusive Properties.
On the supply side, there were also previously unprecedented changes. “In fact, at this time only those who have to sell are selling. Those who do not have to wait for more favourable conditions for sale. The low demand favours creditworthy buyers and they demand a price correction. Real transaction prices are falling and selling times are lengthening. However, most bidders do not hear of a faster and more significant discount from the asking price,” explains Jiří Kučera.
Rental housing is still in demand.
A frozen market, high interest rates and a low supply of affordable properties have resulted in an increase in rental housing. Both in the number of contracts concluded and the amount of rent. “It is not a matter of a desired choice of those interested and an inclination towards this type of housing, but the fact that owning their own home is effectively unaffordable for a significant part of the population. And high demand is pushing up rental prices,” says the director of Luxent real estate agency. In the rental sector, the situation with Airbnb apartments is also changing. According to Kučera, owners are moving back from long-term rentals to short-term rentals after a spike in the post-holiday period. Tourism is on the rise again. In terms of new trends, there is a growing demand for premium services (e.g. reception, fitness, etc.) in luxury properties and new buildings.
At the same time, rental yields are becoming more standardised. “What the market offered in the past was not natural. Thanks to the corrections in sales prices and the simultaneous rise in rents, the cumulative return on investment in real estate is becoming comparable to other investment instruments again,” says Jiří Kučera, adding, “Institutional investors want projects that are ready to rent from the outset. Small investors have been waiting for a while, and we can expect a revival of their interest this year.”
When it comes to holiday properties, it’s the high-end ones or those abroad.
With the unsatisfactory development of the economic situation, interest in so-called second homes in the country focused last year again only on the best quality projects in very attractive locations. These include, for example, luxury mountain apartments from the Luxent portfolio. For example, the Harrachov Peaks development project in the Krkonoše Mountains offers around ten available units. A new addition are the Laka Living apartments in the Šumava National Park.
“The entire sector of recreational real estate in the Czech Republic has seen a sharp drop in prices, demand and the number of transactions. De facto, only very creditworthy clients are buying, who choose carefully what they buy and for how much. It is a return to the standard market development, the anomaly in the recent unimaginable growth of this segment was related to the covid era,” Jiří Kučera summarises and adds: “However, the demand for real estate abroad has increased significantly. The interest is concentrated mainly in southern Europe, e.g. Croatia and Spain. However, more exotic destinations are also on the rise, including Costa Rica, Cape Verde, Mauritius, Thailand, Indonesia and the evergreen United Arab Emirates. We will therefore be focusing intensively on expanding our international portfolio in 2024. In addition to the now classic European destinations, we will also cover other regions in Asia and Latin America.”
Historic properties – a specific part of the real estate market.
Historic and special properties represent a completely distinct area of the real estate market. This includes unique properties that are offered in both pre- and post-renovation condition. “Those interested clearly prefer properties after reconstruction. Robust renovations do not attract clients as much, as they are extremely demanding, both in terms of time and money,” says Lenka Munter, a specialist in historical real estate.
“Last year we successfully sold, for example, the former post office building in Orlík nad Vltavou. This year we have on offer, for example, the completely restored Třebotov fortress near Prague or the Baroque castle complex Mirošov between Prague and Pilsen. A new addition is the early Baroque castle Žitenice near Litoměřice,” says the director of Luxent.
What will happen on the real estate market this year?
Jiří Kučera expects a slight recovery this year. However, prices of newly marketed houses and flats will increase slightly. The rising demand will be helped by a small reduction in mortgage interest rates. The fall in interest rates on savings accounts will then lead more solvent buyers to become more interested in property again. The number of building starts that developers have been putting off could increase. In fact, prices of selected building materials will not rise as steeply, and the price status quo will be maintained in the vast majority of cases.”
And what is the outlook in the premium segment?
There will be no major changes in the luxury segment this year. “Really good quality properties will sell well in 2024, their price will increase. However, there remains very strong pressure on the price of those that do not meet the basic requirements to be considered high-end. The time when it was possible to sell even seemingly high-quality flats and houses well and expensively is over and will probably not return,” predicts Jiří Kučera, adding, “Buyers will become more demanding both in terms of the quality of the property and the top level of the real estate service. Dealing with the best properties will be the domain of specialized and proven professionals who are able to mediate real estate transactions in high quality, including the provision of all related services again at the highest level.”
Source: Luxent
