As a result of falling interest rates, deferred demand is returning to the market for new flats and the real estate market is growing significantly. In the crisis year of 2022, only 11% of buyers purchased a new apartment on a mortgage, now it is already a third and the share of applicants for a loan is steadily growing. This is according to an analysis of the largest Czech residential builder Central Group. Most people under 40 buy on credit. However, the sharply growing demand is clashing with insufficient supply, and prices of flats are already starting to climb up again and should continue to grow at a rate of around 5% per year.
The growing interest in new flats and the recovery in mortgage activity is confirmed by the latest data from Central Group. While nearly half of buyers previously used mortgage finance, this share has fallen to just 11% in 2022 due to the geopolitical situation, record inflation and soaring interest rates. However, thanks to the stabilisation of the situation, the cheapening of mortgages and the improvement in their availability, the share of loan applicants is starting to grow again. Last year it rose to 28% and this year already a third of buyers are financing a new home with a mortgage.
The analysis is confirmed by the latest data from the CBA Hypomonitor, according to which the volume of newly granted mortgages in June increased by 73.8% year-on-year and reached CZK 20.2 billion. It can be expected that the share of loan applicants will continue to grow, also as a result of the gradual alignment of mortgage payments and rents, which will stimulate demand for home ownership. According to a survey by Central Group, 82% of Czechs prefer living in their own flat with a mortgage to renting. When the mortgage and rent payments are approaching, the preference for living in one’s own flat again prevails significantly, as common sense says that after years it is better to have a paid-off flat than to have a box full of bills for rent payments.
“We are also seeing sales growth in our country. Last year our sales were up 60% and this year we are already halfway through the year at similar numbers to last year. The higher numbers are due to the return of loan applicants. This year, people using a mortgage to buy a new property already account for a third of buyers and we expect this trend to continue. Theaverage interest rate on newly granted mortgages, according to the latest CBA Hypomonitor data, is still falling and at its current 5.06 per cent is the lowest since June 2022, which for many means an impetus to act and deferred demand is returning to the market,” says Michaela Váňová, CEO of Central Group.
Source: Central Group
