Residential market overheated in Prague

Colliers has summed up this year’s activity in the Czech residential real estate market. According to their analysis, Czechs are oriented largely towards an ownership model. The main driver for price increases is a significant excess of demand over supply.

The ratio of owner-occupied to rented apartments in Prague is approximately 70:30, comparable to the EU27 average. Still, the Czech Republic is somewhat behind more advanced markets in terms of market evolution towards new trends. However, with the shift to hybrid working, intense talent searches, and the growth of the business services sector, Prague and other large Czech cities will need more flexible housing solutions soon.

Sales prices for flats have been increasing constantly since 2014. In Q3 2022, the average asking price for a newly built flat anywhere in Prague was approx. 155,000 CZK (approx. EUR 6,310 EUR) per sqm. This represents an increase of 7 pct just since the beginning of 2022, and an increase of 46 pct over 3 years. The main driver for price increases was a significant excess of demand over supply. The demand still has not been satisfied; however, professionals agree that the Prague residential real estate market basically hit a barrier for what prices are possible and reasonable to ask for a new flat.

The rental sector experienced several leapfrog changes condensed into a short period of time. These changes were first influenced by the pandemic and then by the wave of refugees arriving from Ukraine. Recently the rents have started to increase to approx. CZK 385 (approx. EUR 15.70) in Q3 2022. Despite this fact, the availability of flats since H1 2021 has decreased rapidly. The lack of apartments for rent caused a situation where even traditional developers started to openly consider new PRS projects where adding some project branding and extra services for the tenants could justify above average costs.

Source

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