Prague is not only one of the most popular tourist destinations in Europe, but it is also quickly becoming one of the most expensive ones, at least as far as property prices are concerned.
The price of new buildings in Prague has risen by 81% in the past six years alone.
Not even the current coronavirus crisis has shifted the real estate market and analysts expect the trend of ongoing price growth to perpetuate in the future.
The people’s uncertainty regarding the evolution of the current situation alongside the government’s restrictions is conversely contributing to their quest to search for apartments to invest in, while the record-breaking mortgage sales seem to be encouraging them further.
According to data provided by Deloitte, the price of new buildings in Prague grew by 81% in the last six years and analysts strongly believe that the lengthy legislative process of construction plays a big role in this.
“We, unfortunately, have extremely bad construction regulations, building new apartments takes very long, and this leads to inadequate response from the supply side of the real estate market. This insufficiency then led to the price lunge,” says Senior Economist of BH Securities, Štěpán Křeček.
Along with numerous administrative restrictions put on potential new housing projects in Prague, a frequently discussed cause of the growing housing prices in the Czech capital is the situation on the short-term rental market. With Prague’s growing popularity among international tourists, the use of services such as Airbnb grows equally as much.
According to Deloitte’s estate expert, Petr Hána, a new project in Prague takes on average 9 years.
Hána believes that the situation has been dragging on ever since the crisis around 2014 after which interest in housing grew and supply hasn’t been able to keep up with demand ever since. Apartments have become a classic investment opportunity due to the sustainable price increases, which further escalates demand, adds Křeček.
These increases should continue in the future. Hána affirms that the numbers aren’t showcasing any signs of change in neither price growth nor sale trends, we can merely expect it to slow down in pace.
“Money as debt is being pumped into our economy through high deficit and low-interest rates, transferred into mortgage loans with extremely low-interest rates. The fact that there’s a lot of money in the sector can only lead to more property growth,” adds Štěpán Křeček.
At the end of October, the average price of new vacant apartments in Prague consistently grew by 7%, to 118 200 CZK per square meter.