The profitability of investments in residential real estate further decreased significantly in April. This follows from data provided by UniCredit Bank. Its indicator, which represents the net annual rental yield, from which the average of mortgage and government bond interest rates is deducted, fell by 26 points month-on-month to minus 2.96 percent in April.
The gross annual rental yield in the Czech Republic fell by three points month-on-month to 3.73 percent. After taking into account the expected fixed rate of real estate wear, which was two percent, the estimated net annual return was 1.73 percent, the bank said.
According to the bank, the reason for the decline in the index was mainly a significant increase in government bond yields and a further increase in offer mortgage rates. On the other hand, rent profitability for the average regional cities in the Czech Republic and after adjusting for the expected 2% fixed annual wear rate rose by eight points month-on-month to 1.48 percent due to a sharp month-on-month rise in rental prices (by 4.1 percent), while real estate prices rose at a slower pace (by 1.6 percent).
“The relative disadvantage or unavailability of real estate will gradually weaken demand and slow down real estate price growth. This effect has not yet manifested itself in April, but we expect a sharp slowdown in real estate price dynamics in the second half of this year,” said UniCredit Bank analyst Jiří Pour.
Of the regional cities, according to the bank, real estate was ‘least disadvantageous’ in Ostrava, Ústí nad Labem and Olomouc, while Brno, Prague and České Budějovice stand out at the opposite end of the scale. The tension indicator fell month-on-month in all regional cities, most notably in Hradec Králové (by 42 points minus 3.14 percent), Liberec (by 40 points minus 2.27 percent) and České Budějovice (by 38 points minus 3.21 percent). percent).
UniCredit’s real estate market tension indicator shows the extent to which Czech real estate is attractive to investors. The more attractive Czech real estate investments are, the more the increased demand pushes prices up.
Source: UniCredit Bank and CTK
