New apartments in Prague have seen their prices increase by 80% over the past six years
Prague is not only one of the most popular tourist destinations in Europe, but it is also quickly becoming one of the most expensive, at least when it comes to property prices.
The price of new buildings in Prague has increased by 81% in the past six years alone.
Even the current coronavirus crisis has not changed the real estate market and analysts expect the trend of continued price growth to continue in the future.
Citizens’ uncertainty as to how the current situation will develop alongside government restrictions conversely contributes to their quest to find apartments in which to invest, while record mortgage sales seem to encourage them further.
According to data provided by Deloitte, the price of new buildings in Prague has increased by 81% over the past six years and analysts strongly believe that the lengthy legislative construction process plays a big role in this regard.
“Unfortunately, we have extremely bad building rules, it takes a very long time to build new apartments, resulting in an inadequate response from the supply side of the real estate market. This shortfall then led to a surge in prices, ”explains Štěpán Křeček, senior economist at BH Securities.
In addition to the many administrative restrictions imposed on potential new housing projects in Prague, a frequently cited cause of rising housing prices in the Czech capital is the situation in the short-term rental market. With the growing popularity of Prague among international tourists, the use of services such as Airbnb is increasing just as much.
According to Deloitte’s real estate expert, Petr Hána, a new project in Prague takes an average of 9 years.
Hána believes the situation has dragged on since the crisis around 2014, after which interest in housing increased and supply has not been able to keep up with demand since. Apartments have become a classic investment opportunity due to lasting price increases, which further increase demand, adds Křeček.
These increases are expected to continue in the future. Hána says the numbers show no signs of a change in either price growth or sales trends, we can just expect it to slow down.
“Money in the form of debt is pumped into our economy through a high deficit and low interest rates, transferred into mortgages at extremely low interest rates. The fact that there is a lot of money in the sector can only lead to more real estate growth, ”adds Štěpán Křeček.
At the end of October, the average price of new vacant apartments in Prague steadily increased by 7% to CZK 118,200 per square meter.