The profitability of investments in residential real estate increased in August for the second month in a row. This follows from data from UniCredit Bank. Its indicator, which represents the net annual rental yield from which the average of mortgage and government bond interest rates is subtracted in August, rose 36 points month-on-month to minus 3.33 percent.
According to the data, the gross annual rental yield in regional cities of the Czech Republic increased by another seven points month-on-month to 3.70 percent, as strong month-on-month rent growth continued, while apartment prices practically stagnated.
“The real estate market is continuing to cool down, which is expected to be caused by the disadvantageous or unaffordable price of residential real estate. We expect that real estate prices will continue to stagnate or decline in the order of units of percentage points in the rest of 2022,” said UniCredit Bank analyst Jiří Pour .
From the data of the Realitymix.cz portal, it follows that the average offer price of apartments in the regional cities practically stagnated month-on-month (increased by 0.1 percent) in August after the decrease in July, which in a year-on-year comparison means a further noticeable slowdown to 14.1 percent from 17.7 percent in July. On the other hand, asking rent prices, fueled by high inflation and demand from households that cannot afford to buy their own homes, on average added a strong 2.2 percent month-on-month and their year-on-year growth slowed slightly to 14.3 percent, the data showed.
In the coming years, according to Pour, real estate prices should grow more slowly than inflation, which will gradually deflate the real estate bubble. In his opinion, a more significant drop in apartment prices would require the outbreak of a deeper economic recession, which cannot be ruled out, but which he does not expect in the basic scenario.
When looking at individual regional cities, real estate in Ostrava, Ústí nad Labem and Liberec was the ‘least disadvantageous’, while at the opposite end of the ranking, Brno maintained its lead, followed by Hradec Králové and Prague. On a month-on-month basis, the indicator increased the most in České Budějovice (by 59 points) and Pilsen (by 46 points) due to a month-on-month decrease in apartment prices and an increase in rent prices, while it only decreased in Ústí nad Labem (by a tiny one point) due to the opposite month-on-month increase in apartment prices and decrease in rental prices.
Source: UniCredit Bank and CTK
