Housing price map: Discounts are not taking place, apartments “for investment” often remain empty
The average prices of new flats in Prague climbed to 137,518 crowns per square meter in the third quarter. The most expensive part of the metropolis is Prague 2, the price here exceeded 177 thousand crowns. This was shown by an analysis of the development companies Central Group, Trigema and Skanska Reality, which Aktuálně.cz has at its disposal. The rise in prices is driven mainly by the popularity of “investment flats”. At the same time, they are overestimated by up to 30 percent.
According to the developers, sales prices of flats in Prague rose by almost fifteen percent in the third quarter, when they climbed to an average of 137,518 crowns per square meter. The average offer price of an apartment was 9.2 million crowns, in the same period last year it was 7.6 million crowns.
Flats in Prague 2 were offered at the highest prices (over 177 thousand crowns per square meter), and remain the lowest in Prague 9, which is the only district with a price offer below 130 thousand crowns per square meter. This was followed by Prague 10 (over 130,000 crowns per square meter).
Only in these two city districts do prices remain below the Prague sales average. According to the developers, this is also due to the fact that Prague 9 and 10 are experiencing the greatest construction development. Authorities have allowed the construction of the most flats in recent years, and over 40 percent of all flats in the metropolis that builders have completed in the last decade have grown there.
The only district where the offer price per square meter has decreased is Prague 1 (165 thousand crowns per square meter). At the same time, however, it was the second highest bid price. In the center, however, there were only twelve vacant apartments on offer, the least of all city districts. Developers have also traditionally sold the fewest apartments here, only eight.
“The situation with new flats in the very center of Prague is minimal construction, and therefore their low number on offer, or the low number of flats sold. Thus, even one flat can significantly affect. “Said Michaela Tomášková, Executive Director of Central Group.
The selling price of flats in Prague 1 was 166,802 crowns per square meter in the third quarter, so real estate was sold here the most expensive.
Most flats found buyers in Prague 4
In all districts of Prague, the price exceeded 115 thousand crowns per square meter. The highest year-on-year growth was recorded in Prague 4, where prices jumped by almost 23 percent to 127,303 crowns per square meter.
People have been buying the most flats in Prague 5 for a long time. In the third quarter, however, only 175 flats were sold here, the most populous city district of Prague 4 and then Prague 9.
Photo: Aktuálně.cz according to Central Group data
The data from the development companies Central Group, Trigema and Skanska Reality also showed that in the whole of Prague, those interested could choose only 2,750 new flats in the third quarter. This is about half the number of flats available in the same period last year. At the same time, however, this means that thousands of newly built flats in Prague are empty and companies are not forced to reduce their prices, because they are betting on a steady rise in housing prices.
The Czech National Bank has already responded to the overheated housing market. In addition to the regular increase in rates, which are gradually making mortgages more expensive, on Thursday it also reduced their availability. It approved the reintroduction of credit limits for mortgage loans, which they canceled last spring due to a coronavirus pandemic. According to some economists, this is a rescue brake at a time of rising inflation. At the same time, many people will also have to forget about their mortgages and thus their own housing.
At the same time, the central bank stated that the reason for tightening the limits was the fact that the prices of investment flats in the Czech Republic were overvalued by more than 30 percent in the second quarter, and the others by almost 25 percent.
Buying dozens of investment apartments
According to the consulting company Deloitte, at the beginning of last July, 6,179 new flats were offered in Prague for a total of 47.5 billion crowns. This year, at the same time, there were only 3,543 units in total for 29.2 billion crowns.
According to analysts, the limited offer of new flats and their rising price is mainly due to the continuing boom in the purchase of “flats for investment”.
People investing in real estate often try to protect their savings from rising inflation. At the same time, however, many experts criticize the purchase of flats for investment, as they see it as one of the main reasons for the unavailability of housing. In addition, investment flats often remain empty. The “blocking” of these apartments then leads to further overheating of the market and the continuing rise in prices for “ordinary people”.
“Investment flats often remain empty, as their owners are betting on an increase in capital value, not on rental income,” says housing expert Zuzana Chudoba of BTR Consulting.
According to her, the purchase of investment real estate was also popular with so-called institutional investors, ie large organizations or companies that buy, for example, a “package” of several dozen flats.
Under normal circumstances, owners of investment apartments would offer to rent. However, according to a special indicator of UniCredit Bank, the profitability of investments in residential real estate continues to decline, for example, in September, net rental income in the Czech Republic was 1.65 percent. For many of them, it is easier to just leave it blank and wait for their market value to increase.
Developers and analysts have also long criticized slow housing construction. For example, according to BH Securities chief economist Štěpán Křeček, there are currently enough projects with building permits issued. “However, the bottleneck is on the side of the builders, who do not manage to carry out the permitted constructions for the planned budgets,” says Křeček.