Prague’s residential real estate market is the most expensive and overheated in the EU – Brno Daily
According to the latest census, there are approximately 721,300 apartments in Prague. Photo credit: Colliers.cz.
Prague, December 6 (BD) – According to the latest census, there are approximately 721,300 apartments in Prague. The number of new apartments completed annually averages about 5,500 units per year, about half of the city’s needs.
“This shortcoming is mainly caused by lengthy permitting procedures, especially since the time required to obtain a zoning decision is extremely long,” said Josef Stanko, principal research analyst at Colliers, a company providing services. for commercial real estate and investment management.
According to the World Bank’s 2019 Doing Business Index, the Czech Republic ranks 156th out of 190 economies worldwide in the length of permitting processes for a simple warehouse project. In practice, some projects in Prague can take up to 8 years to obtain a zoning permit. Stanko added that the growing scarcity of residential space is driving up apartment prices.
sales market
Sales prices for apartments have steadily increased since 2014. In the third quarter of 2022, the average asking price for a newly built apartment anywhere in Prague was around 155,000 CZK (around 6,310 EUR) per square meter. This represents a 7% increase since the beginning of 2022 alone. Before the pandemic, the average price was only CZK 106,000 per square meter in the third quarter of 2019, which suggests a 46% increase over 3 years. The main driver of the price increase was the large excess of demand over supply, which has still not been satisfied.
Analysts agree that with current prices and mortgage rules, the residential real estate market in Prague has essentially encountered a barrier in terms of what prices it is possible and reasonable to charge for a new apartment.
“According to the CG index (made by one of the biggest developers), at present, anyone who plans to buy an average apartment of 70 square meters in Prague with cash should save their entire income average annuals for 17.3 years,” Stanko said. “It is currently the worst result in the entire European Union. By comparison, the same index yields only 8.8 years of savings needed in Warsaw. In Berlin, where the housing situation is often described as critical, the figure is 9.2 years.
A significant price increase is also visible on the market for older apartments. The current price in the third quarter of 2022 averaged 124,000 CZK (5,050 EUR) per square meter. After the rapid rise in market prices over the past three years, 2022 will see diminishing returns for the sector. Year-to-date, average price increases have slowed significantly to 2%, indicating that the market is approaching its price ceiling, as evidenced by the current total volume of new mortgages.
Rental market
The rental industry has seen several condensed speed jumps in a short period. These changes were first triggered by the pandemic and the subsequent release of apartments previously offered through unregulated Airbnb platforms. Then came the wave of refugees arriving from Ukraine. Before the pandemic hit in 2020, the estimated number of rental apartments offered through platforms such as Airbnb reached over 14,000 units. Shortly after the Covid-19 epidemic, with the sudden disappearance of students and tourists, many of these apartments entered the medium and long-term rental market, driving down the average asking rate for rents. at around CZK 310 (EUR 12.6) per square meter in Q1 2021.
Since then, with the decline of the pandemic, rents have started to increase again, reaching around 385 CZK (15.70 EUR) in the third quarter of 2022. Despite this, the availability of apartments since the first quarter of 2021 has rapidly decreased from from over 13,400 units in the second quarter of 2021 to just 6,100 units in the third quarter of 2022. One of the reasons for this is the impact of the Russian invasion of Ukraine.
The lack of rental apartments in the Prague rental market has started to attract the attention of new institutional rental operators. After that, even traditional developers started to openly consider “new” PRS projects where adding project branding and additional services for tenants could justify above-average prices, usually above the rate classic public market. Available data shows that the required rent for PRS projects ranges from 350 to 750 CZK per square meter. At city center locations, it ranges from about 450 to 650 CZK per square meter.
“In our research, we estimate the number of apartments to range from 5,000 to 7,500, including what is currently under construction,” Stanko said. “Even though Czechs will continue to favor owner-occupied housing, the market for rental apartments will continue to grow, especially given the current economic situation and the requirements for obtaining a mortgage to purchase an apartment. PRS will thus increasingly become one of the few options available to citizens of Prague to be able to live and work directly in the capital.
https://brnodaily.com/2022/12/06/news/pragues-residential-real-estate-market-is-the-most-expensive-and-overheated-in-the-eu/https://brnodaily.com/wp-content/uploads/2022/12/TZ-Colliers-Praha_ilustracni-1024×575.jpghttps://brnodaily.com/wp-content/uploads/2022/12/TZ-Colliers-Praha_ilustracni-150×84.jpgCzech Republic / WorldCzech Republic,NewsAccording to the latest census, there are approximately 721,300 apartments in Prague. Photo credit: Colliers.cz. Prague, December 6 (BD) – According to the latest census, there are approximately 721,300 apartments in Prague. The number of new apartments completed each year averages about 5,500 units per year, or about half of…Bing NiBing
Neither[email protected]AuthorPh.D. student in communications, die-hard movie buff and border culture fanatic and picky music lover.Brno Daily
Comments are closed.