Real estate market update: November 2021
Updated: Nov 18, 2021
The sales prices of older flats this year in the Czech Republic in comparison with the previous year shows an average increase of 26%.
In Prague, the price increase is slightly more "favorable" – only 18%. This year in Prague, the average price of apartments has reached over 102.000 CZK per m2. According to already closed reservations in the fourth quarter of this year the average price of the sale of apartments in brick houses will exceed 118.000 CZK per m2 and in panel buildings 98.000 CZK per m2.
The rise in apartment prices is significant in all locations and segments. Compared to last year, the most significant growth is in locations more distant from Prague, Brno and other larger cities. In these areas the increase is over 30%.
The increase in apartment prices in Prague and whole Czech Republic grows with each passing quarter.
When comparing the average salary with the price per square meter of real estate in Prague, you’d need two average gross salaries in order to buy one average square meter. In comparison with the situation of 2008 (another historical maximum) however, interest rates or the possibility of obtaining a mortgage loan for a longer period are much more favorable today. Banks are willing to lend money. The economic situation is also favorable. Thus, the market can be expected to be able to absorb even more price increases, although certainly not "so dramatic". Buying apartments on a mortgage loan is still much cheaper than it was ten or twenty years ago.
What contributes to the prices growth?
Over the last ten years, an average of 5,000 flats have been built in Prague every year. A deficit of the new constructions is being created in Prague, which has contributed to the sharp rise in property prices. To reduce this deficit, we should ideally build an average of 8,000 apartments a year.
Long-term low construction, together with an inefficient real estate market, low interest rates and the overall growing prosperity of the society are among the main reasons for the fast growth of real estate prices. It is not a market failure, as some believe, it is a failure of the Czech Republic's housing policy.
During the period of economic growth that we have witnessed in the last 6 years, the real estate market would be able to absorb the construction of even 10,000 apartments a year. Then there would be no such sharp rise in prices as we have seen in recent years.
However, it is not just about construction. Prague is also bothered by a large number of long-term empty flats. Only the city of Prague has over 2,000 unoccupied flats. Altogether, there are 45,000 unoccupied flats in Prague which came as the result of the 2011 census. Let‘s see what the latest census data from this year tell us. If these flats were repaired and put on the market, it would significantly help in solving housing problems.
Housing construction, completed apartments
The following chart shows fully constructed apartments and family houses from 2006 to the present in Prague. On the same chart you will see the statistics on housing construction in Vienna where there is no problems with the real estate market like we have.
The comparison with Vienna is interesting because it is approximately the same size as Prague. Prague has an area of 496 km2 and has a population of 1,34 million. Vienna has long been ranked as one of the best cities to live in the world, and it can be an inspiration for us in many areas of city development. In the last 12 years, an average of 7,8 thousand flats have been built in Vienna every year.
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