Czech housing construction at a peak, but apartment prices rise

Czechia is building more housing than it has in years: at the end of the third quarter, 7,200 new apartments were on sale in Prague, a quarter more than a year earlier. According to analysis by the developers Central Group, Skanska Residential and Trigema, that is a record since 2012. Even so, property prices continue to rise.

The picture is similar in Brno. According to the developer Trikaya, fewer than 1,500 apartments were on offer there last September, while now there are more than a thousand additional ones. Martin Gürtler, an economist at Komerční banka, says the higher volume of residential construction could ease pressure on further property price increases in the future.

More supply does not mean reform

The developers themselves stress that the growth in supply is not the result of systemic changes, such as faster issuing of building permits. It is simply that more projects, prepared well in advance, have reached the market at the same time.

In the first eight months of the year, construction began on 29,500 apartments in Czechia, 5,600 of them in Prague. What happens next depends largely on whether investors actually decide to launch the projects they have prepared.

Materials and loans are getting more expensive

The main problem for developers remains the same: expensive building materials. In September they were almost seven percent more expensive than a year earlier. One reason is high oil and energy prices, which drive up the cost of producing plastics and insulation materials, for example. Interest rates on construction loans are rising too.

As a result, companies are calculating whether starting construction will pay off at all. “Higher construction costs and rising interest on construction loans will delay the start of building, which will affect the supply of apartments and other property,” said Pavel Malyshev, managing director of Preco Group. Central Group owner Dušan Kunovský believes supply may fall from its current peak: costlier financing and slow sales could hold back new projects.

Buyers will feel the rise in material costs as well: developers will try to build the higher costs into their prices. And the sums they are asking for apartments are already very high — relative to salaries, among the highest prices in Europe.

Around Prague guide on the topic: Apartments in Prague over 10 years: prices up 2.5 times — but only on paper

Around Prague, based on reporting by novinky.cz