The price of newly-built flats in the Czech Republic is on the rise. The increase has been particularly visible in the capital Prague, which has the most such properties, Mladá fronta Dnes reported on Thursday.
While developers were offering freshly built properties at an average of CZK 63,200 a square metre at the end of last year, that figure had risen to CZK 67,000 in April.
A representative of developers Ekospol, Evžen Korec, told Mladá fronta Dnes that there had been a marked increase in prices per square metre last year and so far in 2015. Prices should continue to climb slightly, he said.
Milan Jankovský of Central Group attributed the rising prices for new properties to several factors. These include the increased cost of building work; the weakening of the Czech crown towards the euro (which has made materials more expensive); and the growing cost of preparing projects due to “long-term legislative chaos”.
Trend Report, a publication produced by the Association for Real Estate Market Development, said sale prices had risen by three percent in 2014 and were likely to do the same this year.
Growing prices of new flats and the expectation of a further upswing, low interest rates and the relatively high price of Prague properties have been leading some people to invest in second properties and rent them out, Mladá fronta Dnes reported.
Milan Jankovský said investors were capitalising on the fact that interest payments were lower than market rents for comparable apartments.
Interest rates are around 2 percent and flats can be let out at a return corresponding to about 5 percent, the Central Group representative said.
Tomáš Pardubický of developers Finep told the daily that a surprising number of investors were middle class and young. This is likely a reaction to the long-term failure to sort out the Czech Republic’s pension system, he said.
As for how high a return investors can expect, conservative estimates are at around the 3 percent mark. But Evžen Korec of Ekospol said a yield of 5 percent was possible if flat owners set rents correctly.
Speaking more generally, cenovamapa.org’s Milan Roček said the rise in prices of new flats was – as in the past – leading to higher prices for older ones, including those in “brick” buildings and prefabricated apartment blocks.
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