What is the situation regarding apartments in Prague? Jan Večerka, CEO and founder of the crowdfunding platform BrikkApp, brikkapp.cz, answers these questions and more.
Apartment prices are falling, especially in older houses before reconstruction, but also in uninsulated houses and cottages. But of course, it depends on the location.
Do you see any interesting things on the housing market? Where is the most expensive or cheaper. What is the biggest demand and where are the least available apartments?
In general, flats in good locations and in brick houses tend to hold a higher value and are more in demand. Good locations can be close to the city centre, with good access to public transport, with amenities such as schools, shops and green spaces. These factors can influence the value of properties in a given area.
The end of last year brought a slight stabilisation in interest rates, in addition to a slight fall in property prices. According to real estate agents, prices of flats, especially in older houses before renovation, but also of uninsulated houses and cottages, are mostly falling. In some regions, the decline was more pronounced, but in larger regions such as Prague and Brno, property prices did not fall significantly. I expect that once mortgage rates fall to five per cent, demand for property will rise again, and this should halt the fall in prices.
What do you think about the real estate market in Prague and what do you expect in the future? Do you think people will prefer to live outside of Prague, either in their own or rented accommodation?
In the past years Prague has experienced high demand for apartments, which has led to rising prices with limited supply. More demand than supply created a situation where apartments were often sold quickly and prices rose. However, the real estate market is volatile and demand can fall due to various factors such as the economic situation, changes in demographic trends or changes in construction activity.
The trend for suburban housing is strong, but data shows that the population of Prague is steadily increasing. Unfortunately, current prices do not allow many people to buy their own apartment, and the trend of renting will undoubtedly grow.
When do you think the high interest in housing in Prague will subside? Will supply ever meet demand?
In a favourable scenario, where there is an increase in the supply of flats and/or a decrease in demand, the market could level out and prices could fall. All developers agree that shortening the building permitting process is key. This will both bring more apartments to the market and reduce the cost of capital that will be held in projects for a shorter period of time. However, the exact timeframe and market developments are difficult to predict.
How do you personally see the future of the real estate market in Prague?
The market has changed dramatically in the last year and buyers have an advantage. Most buyers are not under pressure to make a quick decision, so they have time to prepare and can negotiate a discount. On the other hand, people who need an investment property and a mortgage may be out of luck due to high rates. The yield is then no longer favorable and some people do not have the creditworthiness to finance.
The development of prices will depend on the development of interest rates and the related development of inflation. According to the CNB’s latest forecast, inflation is expected to decline gradually after peaking at the end of last year. The fall in inflation could signal a reduction in the base interest rate and a subsequent gradual reduction in mortgage interest rates. However, the low interest rates of 2020 and 2021 will be a long way off. Our estimate is that the first downward shift in rates could occur in 2Q 2024 at the earliest.
