Czech apartment prices: developers plan another increase

Czech developers intend to keep raising apartment prices, even though housing in Czechia is already among the least affordable in Europe. According to the new Deloitte Property Index, a new 70-square-metre apartment can now be bought for 16.9 average gross annual salaries, up from 15 a year ago. Of the 49 cities in the ranking, only Vlorë in Albania fares worse.

The top ten of this gloomy list also includes Brno, where such an apartment costs 15 annual salaries, and Ostrava with 14.1.

Demand outstrips supply

Further price growth is expected to be driven by persistently high demand: there are still more buyers than apartments. “The good news is that current expectations for the pace of price increases are lower than the survey in the first half of the year showed,” said Michal Vacek, director of CEEC Research. At that time, companies planned to raise prices by 7.8 percent.

“New-home prices in Czechia have reached the level of the most expensive countries in Western Europe, but local household incomes are nowhere near matching them,” said Miroslav Linhart, head of financial advisory at Deloitte. In new-build prices, Czechia ranked second among the countries studied: the average asking price was 5,412 euros per square metre, or about 132,000 crowns. That is more than in Germany or Austria; only Luxembourg is more expensive.

What the market lacks

Experts do not expect any major change in housing affordability in the coming months. According to Linhart, supply needs to expand for that to happen. He also sees the cause of rising new-build prices primarily in the gap between high demand and a years-long shortage of apartments, but adds: “Rising construction costs and project financing continue to play an important role.”

Developers themselves also cite weak supply as the reason for planned new price increases, even though more building is under way. According to the Czech Statistical Office, construction started on 3,922 apartments in August, 42.3 percent more than a year earlier. Experts say this could restrain price growth, but to genuinely improve affordability, even more needs to be built.

Dušan Kunovský, founder of Central Group, the largest Czech residential developer, warns that companies are running out of previously permitted projects, while new ones are not appearing fast enough because of slow approvals. The building revival may soon end. “It will continue to push prices up and worsen housing affordability,” he said.

Mortgages are getting more expensive too

Rising mortgage rates are making it harder to buy a home as well. According to the Swiss Life Hypoindex, the average offered rate rose by 0.28 percentage points in October from the previous month to 5.79 percent. For a typical loan of 3.5 million crowns over 25 years, that means a payment of about 22,000 crowns a month.

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Around Prague, based on reporting by novinky.cz