The cooling of the real estate market is already visible and developers are suffering from the lowest number of inquiries in a decade.
In a market like this, it is not uncommon that developers simply stop construction in order to save money, rather than building apartments and having them left empty, waiting for buyers.
This is exactly the case of Central Group, one of the biggest development companies in the country, which is delaying building of 730 units by about a year.
“We are reacting to the situation on the market. At a time when sales are slowing down by more than half, it is not efficient to build new apartments for storage. There is a bad mood and uncertainty, people are interested in apartments and are asking, but they are postponing purchases. Instead of sinking billions into the development, it is better to have them free for acquisitions,” explained by Dušan Kunovský, the owner and founder of the largest residential builder in the Czech Republic.
They expect sales will go up again in about a year or in 2024, with the biggest deciding factor being the mortgage interest rates.
“The turning point, which according to analysis, should bring a renewed boom in the sale of apartments, is the reduction of mortgage interest rates to the level of three percent per year. This is already the limit when the monthly mortgage payment approaches the amount of the monthly rent,” said Kunovský.
To put that in perspective, a mortgage of the same amount with today’s interest rate of 6% vs 3%, means a difference in monthly repayments of roughly 30%.
This saving is what they believe will kick off the purchasing of their units again.