During the winter months of this year, the interest in new apartments has not waned. On the contrary, sales have increased by almost a quarter, with 1,600 apartment units sold between January and March, representing a year-on-year increase of nearly 150%. However, this growth is partially due to a low comparison base from the previous year.
Prices of apartments are not expected to decrease. According to an analysis by companies Trigema, Skanska Residential, and Central Group, the offering prices of new apartments slightly increased by 1.4% at the end of 2023, keeping them just above 150,000 Czech koruna per square meter. Sales prices slightly decreased by 2.7% to 142,073 koruna. This was mainly due to time-limited incentives and the fact that a significant portion of sellers had already incorporated the reduced VAT rate into their offerings in advance.
In the first months of 2024, average prices did not change significantly, despite a price increase in nearly a quarter of projects in Prague. „In addition to the three percent reduction in the VAT rate in the first quarter, new, more affordable projects have appeared on the market,“ said Petr Michálek, chairman of the board of Skanska Residential. It is expected that apartment prices will slightly increase throughout the year, in the range of a few percentage points. „The return of end customers may also lead to a reduced willingness of residential developers to sell to institutional investors,“ added Petr Michálek.
Continuing construction is a key aspect of the real estate market in Prague. An analysis by Central Group revealed that at the end of last year, more than 143,000 apartments were in preparation in Prague, and by June of this year, this number had increased to 145,000 units. However, the permitting of construction remains problematic, with only around five thousand apartments being permitted annually, while Prague needs at least double that amount. Due to insufficient construction, according to Dušan Kunovský, head of Central Group, apartments are currently at least 15% more expensive than they should be.
Nevertheless, construction activity in Prague continues. During this spring, developers introduced new projects or additional phases of existing projects. For example, Skanska Residential expanded the Emil Kolben Quarter and launched a new phase of Albatros Kbely. Central Group plans the Nové Žižkov Center, and Crestyl began selling apartments in the fifth residential building of the Hagibor complex. J&T Real Estate started selling apartments in Nový Rohan in Karlín.
The mortgage market and interest rates are also significant factors in the real estate landscape. The number of mortgage loan applicants is increasing, but interest rates are decreasing slowly. According to the Broker Consulting Mortgage Index, the average interest rate was around 5.71% at the end of 2023 and decreased to 5.25% in April. „Mortgage loan applicants now face the difficult question of whether to wait for further rate reductions or buy a property now. The situation in the mortgage market has attracted more investors, and property prices are rising,“ said Michaela Pudilová from Broker Consulting. From September 1 of this year, a new amendment to the Consumer Credit Act will allow banks to charge fees for early repayment of loans, which may affect buyers‘ decisions.
When it comes to premium and luxury properties, the changes in the mortgage market do not have a significant impact. According to Jiří Kučera from Luxent – Exclusive Properties, people purchasing such properties typically use other, mostly personal, sources to finance the purchase. He explained that luxury in housing primarily involves the locations of the properties, which have remained relatively stable within the capital city.
Knight Frank found that transactions involving 5+kk and 6+kk apartments with prices above 200,000 koruna per square meter dominate in Prague. Smaller apartments are still considered a good investment, but most of them do not fall into the premium category. Kateřina Poláková from Knight Frank mentioned that while central locations traditionally lead, new projects in previously less attractive areas are increasingly appearing, setting new price levels and expanding the market.
In conclusion, the real estate market in Prague is dynamic and evolving, with a mix of factors influencing prices, sales, and construction activity. The ongoing demand for new apartments, coupled with changes in interest rates and construction permits, creates a complex landscape for buyers, developers, and investors to navigate. As the market continues to develop, it will be interesting to see how these various elements interact and shape the future of real estate in the city.