Prices of houses and flats in the Czech Republic have started to rise again

House and apartment prices in the Czech Republic have started to rise again, although they are falling on average across the EU. In the fourth quarter of last year, housing prices in the Czech Republic rose by 0.3 percent quarter-on-quarter for the second consecutive quarter, but fell by 0.3 percent in the EU by the end of 2023. Germany, for example, recorded a fall in prices in the final quarter of last year, while prices in Poland rose significantly. Eurostat data show that although the price of Czech flats and houses fell by 1 percent year-on-year at the end of last year, they have become 123 percent more expensive since 2010.

According to analysts, the value of housing in the Czech Republic is rising mainly due to greater demand for own property caused by falling interest rates and inflation. However, despite the more positive macroeconomic situation, it is not becoming more affordable because the increased demand is not being met with sufficient supply on the market. Czechia construction is complicated, for example, by complex permitting processes, but it is not helped by the fact that many developers have switched to building rental apartments on the basis of the reduced purchasing power of the population.

"For the whole year 2023, the prices of flats in the Czech Republic decreased by 1.7 percent, which, however, is actually only a minor correction in relation to previous increases. Owning one's own home, which is used by about 78 percent of the population, is still the main goal, actually regardless of generations. In addition, apartments have become an investment commodity that is still attractive to domestic and foreign investors, given the previous price increases. And they are not selling out yet," said Petr Dufek, an economist at Banka Creditas.

Analysts expect housing prices to rise by lower units of percent this year. "More and more money is flowing out of the mortgage market into the real estate market, where they are running into limited supply. This is due to a lack of construction and long permitting processes. As a result of this development, we can expect property prices in the Czech Republic to return to growth," said Štěpán Křeček, economic adviser to the prime minister and analyst at BH Securities.

According to him, similar developments can be expected in Slovakia and Austria. Neighbouring Poland is also struggling with a significant increase in housing prices, where they rose by 13 per cent year-on-year in the fourth quarter of 2023 and double-digit price growth can be expected on the local market this year. The picture is different in Germany, where house prices fell by 7.1 per cent year-on-year in the fourth quarter of 2023 and a quick turnaround to growth is not yet expected.

From 2010 to 2023, apartments in the EU have become more expensive than in the Czech Republic in four other countries. Estonia has seen the most significant increase of 217 per cent. This was followed by Hungary, Lithuania and Latvia. By contrast, prices fell by one per cent in Italy and Cyprus.

Source: CTK