Lower interest rates will not make housing in the Czech Republic more affordable. Combined with stable inflation and the undying desire of Czechs to live in their own homes, demand will rise, leading to higher property prices on the market. Dramatic drops in mortgage rates are not expected and will remain around 5% this year. This is based on data from JRD Group, which was presented to journalists in Prague yesterday by its representatives.
“With the current decline in the price of long-term resources, banks are not going down so fast with the price of mortgages, because their margin for a mortgage is at about one percent. A mortgage price of around five percent is something we will have to live with for a while. Whether it will be 4.8 percent or 5.05 percent we can’t say, but we can’t expect dramatic cheapening. Many expect rates to go down, but on the other hand I think they have got used to the current level,” said Jan Sadil, managing director of JRD Group.
The latest statistics from the Czech Banking Association Hypomonitor show that interest rates on new loans fell to 5.07 per cent this May from 5.1 per cent in April. Banks and building societies in the Czech Republic granted mortgage loans worth CZK 23.7 billion in May. Compared to April, this is an increase of eight per cent and 92 per cent year-on-year. The average mortgage was CZK 3.63 million. The average mortgage payment for a CZK 3.6 million mortgage with a 30-year maturity would be about CZK 19,500 per month at a five per cent rate, and CZK 36,000 per month for a new 2-bedroom apartment with an average price of CZK 8.4 million.
According to the JRD data, the offer prices of new Prague flats will rise slightly for the rest of this year and could be around CZK 158,000 to CZK 160,000 per square metre at the end of this year. However, prices and rents will not subsequently rise at the breakneck pace they have been, according to JRD Group analyst Adam Gregus, as the increase in property prices no longer follows the growth in wages and incomes.
According to the latest data from the development company Central Group, an apartment in a new building in Prague currently costs CZK 152,644 per square metre and CZK 123,683 per square metre for older apartments. In order to buy a new 70 sqm apartment in the capital, one needs 15.4 annual wages, the highest of all surrounding metropolises. According to data from the Czech Statistical Office, the average nominal wage in the Czech Republic in the first quarter was CZK 43,941.
According to an Ipsos survey of 754 people aged between 20 and 50, 67 per cent of respondents consider owning their own home to be ideal. Living in their own home is considered important or necessary by about 87 per cent of people in total. However, in 58 per cent of cases, the high purchase price and in almost 18 per cent the uncertainty of their own financial situation is an obstacle to acquiring a property. Roughly a third of people would be willing to pay CZK 10,000 a month for a mortgage and another 30 per cent up to CZK 15,000. More than half of the respondents think that the state should support home ownership with discounted loans for young families and couples.
Source: JRD Group and CTK
