Stagnating prices and larger supply: What's happening on the Czech real estate market?

Following years of significantly rising real estate prices, the cost of apartments is slightly decreasing while the number of available options is growing.

Expats.cz Staff

Written by Expats.cz Staff Published on 19.07.2022 12:00:00 (updated on 19.07.2022) Reading time: 2 minutes

Some good news for potential property buyers in the Czech Republic: after years of rising prices, they are starting to stagnate and fall slightly. On top of that, the number of options for sale is steadily growing. 

The supply of real estate for sale is growing rapidly, especially in large cities. In Brno, it has increased by 86 percent over the past eight months and by 16 percent in Prague, real estate server GarantovanyNajem.cz reports. The number of properties for sale is expected to increase even more in the coming months.

There are currently 6,600 apartments for sale in Prague and 1,300 in Brno. As recently as October 2021, there were 5,700 apartments for sale in the capital and only 700 in Brno.

"The speed with which apartments for sale are increasing is unprecedented. However, it is far from reaching the peak of 2014, when 13,000 apartments were available for sale in Prague. We thus expect that there will be more real estate for sale in the coming months," Viktor Mejzlík, co-founder of the GarantovanyNajem.cz service, said in a blog post.

In Prague, apartments fell in price for the second month in a row, which last happened in 2018 and only the second time since the start of rapid growth seven years ago.

The major driving force behind this market development is high interest rates and record energy prices, which put pressure on real estate prices. 

"Approximately 40,000 people are waiting for mortgage refinancing this year. At the current interest rate, their monthly payments can increase by up to 50 percent. This puts us in a situation where many people will be forced to consider whether it would be better to sell the property. This applies in particular to owners of investment flats who have a property encumbered by a mortgage. For investment in real estate to make sense, it must have a return of around 5-6%. This is practically impossible in the current situation," Mejzlík said.

Furthermore, the sale of real estate usually takes from three to six months, and owners who want to sell a property quickly are often forced to drop the price by leaps and bounds.

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Mejzlík notes that the willingness to discount is now really great, some owners could even drop the price by CZK 500,000 to CZK 1,000,000.

The fact that real estate prices are starting to stagnate is evidenced by data from the Realitymix.cz portal. In July, the average month-on-month price for 1 square meter fell by 0.9 percent in Prague, by 2 percent in Brno, and even by more than 4 percent in Liberec and Plzeň. 

Although prices have cooled due to unaffordable mortgages and a lower willingness of people to buy apartments, they are still very high. In the first quarter, year-on-year apartment prices in the Czech Republic rose by a quarter, the highest in the EU

The average year-on-year increase in prices per square meter in regional cities is around 18 percent in July. Even in March 2022, it reached 30 percent.

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