According to Eurostat, the Czech Republic had one unfortunate priority last year: real estate prices rose the most of all European Union countries. They increased by almost 26% year-on-year. In Prague today, people need up to 16 average annual gross wages to be able to buy their own housing in a new apartment of 70 m2. In addition, due to a number of unfavorable factors – a steady, albeit more gradual, increase in the price of new buildings, rising building material prices or supply outages and excess demand over supply – a positive turnaround in the real estate market cannot be expected.
It is therefore clear that the deteriorating availability of vacant and affordable housing for purchase will significantly accelerate the demand for rental housing, which has so far been much weaker than in Western European countries. Strict conditions on the mortgage market and rising interest rates on housing loans also contribute to the development of this trend. The monthly cost of a mortgage loan when acquiring an average Prague apartment currently exceeds the monthly rent for the same unit by 17%.
According to a qualified estimate by the analytical department of the JRD Group, the current size of the demand for rental housing on the Prague market corresponds to up to the population of the metropolis: up to 340,830 people are interested in it. The largest group of them are young people (41%), with singles and young couples (20%), families with children (15%), older couples with adult descendants (13%) and skilled foreign workers ( 11%). The individual groups are still growing (now also due to the influx of Ukrainian refugees), but the market has not yet been able to adapt to their number or to the different requirements for the types of rental properties in demand. Large investors in the rental segment primarily target students, singles and young couples and implement projects with a high proportion of small flats, which are intended more for short-term housing.
However, a long-term analysis of sales of new buildings on the Prague market shows that the most numerous age group buying an apartment for their own housing are people between the ages of 34 and 44 who already (in most cases) have at least one child. And it is with the representatives of this group that the prospect of acquiring an apartment into private ownership has deteriorated significantly nowadays. Experts are therefore concerned that their growing demand for rental housing that meets family needs can meet a market full of small investment apartments.
The JRD Group is still primarily engaged (within the JRD Development division) in the construction of healthy and environmentally friendly owner-occupied housing projects. Of course, it responds to current developments in the real estate market, and therefore decided to enter the rental real estate segment. Its JRD Invest division is currently in the preparation phase of projects that take into account the requirements of long-term family housing. Its goal is to implement a new standard in the rental housing market, which will offer those interested security, stability and the possibility of migration within one project according to changing living needs and demands. The new rental apartments will meet the same criteria of healthy living as owner-occupied apartments in JRD Development projects (fresh air and thermal, light and acoustic comfort). JRD Invest plans to manage a real estate portfolio with a market value of up to CZK 5 billion by 2030.
Author: Pavel Linha from the analytical department of JRD Group
