Real estate values in the Czech Republic continue to rise

Data from various sources indicates that, much as expected, the real estate prices in Prague are only rising and that this trend is not expected to change. The projections were that a rise of 10% in 2017 and a rise of 7.5% in 2018 would take place but of course reality exceeded all expectations : in 2017 the price rises were 13.3% , the highest rise in the European Union countries.

The Graph below (Source) illustrates the changes in prices for new apartments between 2013 – 2017 after the removal of outliers amounting to 5% of the most expensive and least expensive apartments.

An additional study indicates that over the years 24014 – 2018 the real estate prices in Prague have risen by 59.3%, so this represents a stable trend of increasing real estate assets value (source).

What is the significance of this in terms of price per square meter?

In 2016 the price of new apartments in Prague reached an all times record high – 60,000 Czech korunas per square meter. This record however was broken in 2017 – on that year the average price per square meter in Prague for all types of apartments (new and second hand apartments) was 65,000 korunas. In this year the most popular districts for investment in the city were Prague 1, Prague 2 and Prague 6. The significance of this is that the price of, for example, a 60 square meter apartment (the average apartment size in Prague) has risen by over ten percent in 2017 alone. The graph below proves this (Source).

In 2018, the average price of a new apartment in Prague rose by 18.6% to over 101,061 Czech Korunas per square meter. In addition, the restrictions placed since June 2018 in the field of mortgages makes the dream of purchasing an apartment almost impossible for many Czechs.

The significance of all this is that as the quality of life in Prague continues to rise, purchasers of apartments are forced to settle, both in terms of location and in terms of the size of the apartments, in order to enjoy affordable housing. Inexpensive housing at a level of beneath 60,000 Czech Korunas is almost unobtainable.

The price rise per square meter in the Prague 1 District 

The significance is that a 50 square meter apartment which cost 6,750,000 Czech Korunas in January 2017 today costs 7,650,000 Czech Korunas

The price rise per square meter in the Prague 2 District 

The significance is that a 50 square meter apartment which cost 4,820,500 Czech Korunas in January 2017 today costs 6,075,000 Czech Korunas

The price rise per square meter in the Prague 3 District

Here, a 50 square meter apartment which cost 4,125,500 Czech Korunas in January 2017 today costs 4,825,000 Czech Korunas

The price rise per square meter in the Prague 9 District

The significance is that a 50 square meter apartment which was sold for 2,950,000 Czech Korunas in January 2017 today costs 3,910,000 Czech Korunas

The housing shortage in Prague is only growing more acute 

Over 2018 only 5000 new apartments were apartments - a decrease of 9% in comparison to 2017. That was the lowest level since 2012 and a decrease of 30% in comparison to the peak year of 2015. Most of the apartments that were handed over were in Prague 5 (23%), Prague 9 (20%) and Prague 10 (17%). The lowest level of new apartment handover was registered in Prague 6 – only 2%. This level is projected to decrease further in 2019 to 4600 new apartments.

The contractors claim that as usual part of the problem derives from the fact that few new construction apartments are being provided – what prevents them from meeting the rising demand for new apartments in Prague. Additional reasons are the new guidelines in the field of mortgages and rising interest rates.

What this means is that smaller apartments may be more expensive per square meter, but they are less expensive than large apartments. The most expensive apartments are 1 + KK deployment apartments at an average cost of 120,000 Korunas per square meter. After them in the price range are apartments in the KK +3 deployment sold for, on the average, 92,000 Czech Korunas per square meter. About 70% of the apartments in Prague were sold for a price higher than 90,000 Czech Korunas per square meter.

It is therefore no wonder that the scope of real estate transactions in Prague has declined by a third in 2018 – to only 60 billion dollars. Some 60% of the investors are locals and some 20% are Germans who identified the potential for investment over the border. In other words, purchasing an apartment in Prague offers them a very fine return on investment from rental fees alone.

The rental prices in Prague continue to rise

In Prague, an average rise of 2.5% a year in lease. Nonetheless, in comparison to other European cities, the rent rates in Prague were the lowest this year. Only in Warsaw was a higher rate registered – 4.3%.

Prague was fifth in the survey of the KPMG company which examined the rent rates in Europe : first ranked were the German cities Munich and Berlin (at 11,345 and 10,142 Czech Korunas per square meter respectively), Vienna (7913 Korunas per square meter), Warsaw (7376 Czech Korunas per square meter).

Are you interested in purchasing real estate in Prague? Please contact us and we will be delighted to help you locate a great investment in this beautiful city.