Developers believe in a market recovery in spring and a drop in mortgage rates year end

28 December 2022

It is difficult to estimate the development of the Czech real estate market next year. In a poll conducted by ČTK, developers agreed on the uncertainty, which will gradually be replaced by a recovery and probably a gradual reduction in mortgage interest rates towards the end of the year. Some have already announced this year that they will postpone some projects, while others plan to take advantage of the current crisis and expand their acquisitions, for example by buying land.

The real estate market was mainly affected by the increase in mortgage interest rates. Therefore, some construction stages have been suspended by the largest residential builder Central Group, among others. The market is still expecting great uncertainty at the beginning of 2023, but experts expect the residential market to recover in the spring.

“This is traditionally one of the strongest sales periods, moreover, people will have overcome the current shock of the energy crisis, inflation and general uncertainty, and this will support their desire to buy a new home or invest safely,” said Central Group spokesman Ondřej Št’astný, and his words were confirmed by Geosan Development director Petr Beneš.

Evžen Korec, the CEO of Ekospol, thinks that large state contracts in particular will decrease substantially. Private companies will also invest less, which also applies to housing construction, he said. There will be a much bigger struggle between companies, especially for large construction contracts, and the time when construction companies had contracted capacities many months in advance is definitely over, Korec estimates.

Developers looking to ride out the crisis include UDI Group. The company’s strategy director Marcela Fialková said that in the Czech Republic the company will, among other things, complete its logistics park on the D1 motorway and will probably start building apartment towers next to the Lužiny shopping centre in Prague. “The crisis is always an opportunity to buy suitable land and to build. We have released a record CZK four billion for purchases this year,” Fialková said.

According to developers, the market will be revived by a drop in mortgage rates, which is expected in the second half of 2023. “By then, the market may adjust to some extent, some people will have to take out mortgages with short fixations, others will find a way through pledging other real estate,” said Adam Greguš, an analyst at JRD. Št’astný from Central Group added that the boom in new apartment sales will bring mortgage interest rates down and bring them closer to the three percent level, which could happen in 2024 and 2025.

Developers do not expect prices for new buildings to fall due to the high cost of construction work and materials. “The current projects under construction were sold out in early 2022 and the newly launched projects will be completed only in early 2025. Therefore, developers are not under pressure to reduce prices of apartments in new buildings. If the low demand for new-builds persists in the second half of 2023 and early 2024, it could lead to a halt in the construction of new projects,” said Josef Kupec, a construction and real estate expert at consultancy KPMG.

Source: CTK

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