CBA analysis: Czech housing prices may have peaked, but not in central Prague

29-08-2019

A study published by the Czech Banking Association predicts housing prices will decrease slightly in the coming years, mainly in municipal districts where more apartment complexes are being built.

Photo: Martina SchneibergováPhoto: Martina Schneibergová The study’s author, economic analyst Tomáš Somogyi of Conseq investment group, says that unsatisfied demand has driven up prices, especially in Prague, and this remains a long-term problem.

“Possible [downward] corrections will only affect less lucrative locations, where the prices rose mainly due to an insufficient supply in the neighbouring areas,” he writes.

Such areas include the outskirts of Prague where new housing developments are slowly cropping up, and in regions throughout the country not within commuting distance from away from local economic centres.

"Recent developments from 2014 to the present day represent a third wave of price increases. Low interest rates played a role. Offering prices rose outside by 43 percent Prague, and by 55 percent in the capital," added CBA Chief Advisor Vladimír Staňura.

Somogyi says fewer Czechs now envision being able to buy flats than five years ago even if they believe prices may have peaked. This is particularly the case in Prague, where salaries have not risen as quickly as residential property prices.

“People who cannot afford to buy in Prague have to look outside of the city, and this is evident in the rise in property prices, for example in Central Bohemia,” he says.

In July, the average rate on new mortgages fell to 2.68 percent. In total, banks issued 6,615 mortgages worth 15.4 billion that month, a slight drop in numbers but increase in value.