The Prague residential market continues to break records. Most flats of the last 10 years were sold in the third quarter of this year, with the number of vacant flats on the market currently at a historic low.
And the evergreen in record-breaking is prices that don’t seem to have a cap.
New flats are currently offered for an average of 137,000 CZK per square meter. For sales that have just begun, the price has climbed to 160,000 CZK per meter.
Prices are also rising throughout other regions. In Brno, for example, new flats have almost caught up with those in Prague.
Development companies Trigema, Central Group and Skanska published the current analysis of the residential market for the third quarter on Oct. 26.
“Recently, unfortunately, we have witnessed an unprecedented decline in the apartments offered. Although new projects are being put on sale, they are far from satisfying all those interested in owner-occupied housing,” says Marcel Soural, owner of the Trigema group.
The enormous demand for new housing during this year knocked down supply in the third quarter. According to the developers, 6,100 new flats for new housing were sold during the first three quarters of the year, which is already 5% more than in the entirety of the previous year. By the end of the year, developers expect around seven and a half thousand apartments will sell.
As a result, the vacancy rate is declining in the market. The lowest value is currently at 2,750 available flats, which is a 51% decrease compared to the same period last year.
According to the developers, the declining offers impact further price growth. “In addition, pricing is really complicated in today’s market for construction work and materials. Suppliers pass on their increased costs to investors. But we believe that it will calm down,” says Soural.
“Since 2015, the prices of new flats in Prague have more than doubled, and the growth rate is also accelerating again. In the last year, a sharp rise in the price of construction work and materials has also contributed to this, but the main culprit for the rise in housing prices is long-term insufficient construction due to slow permitting processes,” says the owner of Central Group Dušan Kunovský.
The comparison between the average price and the average mortgage amount is also interesting. An average 70 meter Prague apartment in a new development project yields some 9.5 million CZK at an offer price of 137,000 CZK per meter. The average mortgage amount is 3.1 million CZK.
Per Soural, this indicates an emerging trend where new apartments will be bought more frequently by larger investors who have cash at their disposal. Although this is not accurate in sales statistics due to the nature of the matter, according to him, the ratio between small buyers and large investors may already be about 50 to 50.
“A rental housing market is beginning to emerge from companies and investment companies. There are now 72 such rental projects on the market, which together number about 3,000 apartments,” says Soural, adding that the interest of large institutional investors is growing. In new development projects, big players are already buying about a sixth of apartments.
Older flats, second-hand flats mirror the market situation of these newer flats The offer for the former fell below 4,000 vacant flats in Prague in the third quarter. Most of them are currently in Prague 5.
The prices of second-hand flats are approximating the prices of new buildings. According to the analysis, the area average price of an apartment for secondary sale in Prague exceeded another million mark, currently amounting to 9.2 million CZK.