Prague Property Market Trends 2018–2019 defining the market
This overview of the Czech real estate market is devoted to one region. More precisely, one city. What is natural: the views of the vast majority of foreign buyers are riveted to the dynamic and promising Prague.
Prague has always been interested. But five or seven years ago, foreigners were actively acquiring real estate in another region of the Czech Republic – in the famous balneological resorts. It was the demand from the Russians that largely determined first the growth and then the current price reduction in Karlovy Vary, Marianske Lazne, and Teplice. It is characteristic that in 2018 only in one Czech region – Karlovy Vary – apartment prices did not rise, but fell. At 3.8%. Single deals are still taking place here, but nine out of ten foreign buyers choose the capital of the Czech Republic today.
Trend number 1: the economy is booming, wages are rising
The Czech economy has been growing for five years in a row. According to the European Commission, in 2018, the country’s GDP added about 3%. This is more than the average for the European Union.
The result is a strong labor market, and unemployment is at its lowest level in the last 20 years (less than 3% on average, and is practically absent in Prague), wages grow twice as fast as inflation.
Skilled personnel in many sectors are not enough, and incomes of local residents will continue to grow. At the same time, the number of people willing to move to the Czech Republic will increase. The InterNations Global Report awarded Prague 8th place among the 72 best cities in the world for expatriates.
At the same time, banks in the Czech Republic, as in most other EU countries, offer very modest rates, and even two percent returns are rare. The inability to earn on deposits stimulates the same Czechs to look for alternative investment options.
Trend number 2: demand exceeds supply
The population of Prague has been growing for the past 15 years. In 2017, another record was recorded – plus 14 thousand new residents (excluding students).
Growth is provided by foreigners, who increasingly choose the Czech Republic for work and business. Leading – predictably – Slovaks, Ukrainians and Russians. But thousands of Germans, British, Bulgarians, Vietnamese, Americans, Chinese, Kazakhstani people work in Prague … The city has become truly international. From abroad came to Prague 15% of the inhabitants. According to estimates by the Czech Statistical Office, about 2.25 million foreigners will move to the country until 2100.
The growth of the solvent population stimulates the demand for services, goods, including real estate. With the latest local developers can not yet cope. Already in Prague lacks about 8 thousand apartments. At the same time last year, only 3,000 new apartments received building permits, according to a report by the Czech Association for Architecture and Development.
First, strong demand from local and foreign buyers. Secondly, the lengthy process of obtaining building permits (on average five to seven years), which will not allow developers to significantly increase the volume. Thirdly, the rise in prices for construction work (about 9% over the past year). Fourth, increasing the requirements for energy saving homes. And, finally, the shortage of construction sites, since Prague, according to the town-planning plan, will not grow in breadth, but due to the conversion of former industrial zones, the so-called brownfields.
Therefore, more expensive apartments will be. However, not as fast as in 2016-2017.
Trend number 3: all types of real estate
In 2017, the Prague real estate market grew particularly actively – prices for apartments in sought-after locations increased by more than 20%. In 2018, thanks largely to the efforts of the authorities (see trend number 4), the boom was cooled. However, slightly – according to Deloitte, the average cost per square meter has increased “only” by 11%.
It is important that all types of real estate become more expensive. In the Czech capital there are no areas that could be called depressed, with unclaimed housing. Even the old panel houses – analogues of Khrushchev – are rising in price after the new buildings. But it is the latter that set the price trends.
For buyers from Russia, location is the most important factor when choosing an object. In which area is the house, how to get to the center, what is the nearby infrastructure …
Prague 10 is the leader in sales today – a convenient area with affordable prices, located near the center. Another area loved by Russians is Prague 5: it is located on the left side of the city, there is a lot of greenery and, as it is believed, the air is cleaner. On the subway to the center just 15-20 minutes.
Finally, in 2018, the demand for Karlin grew up in a microdistrict located in Prague 8 and bordering the city center.