Historical limit of new apartment’s average price in Prague has been exceeded in 2016.

For the first time in the history of the Czech republic the average purchase price of new apartment in Prague (mostly outside the city center) has passed 60 thousand Czech korunas per square meter, as reported in the real estate magazine Real City on May 2016. According to general real estate market analyses prepared in cooperation of Real Estate Enterprises Trigema Skanska Reality and Central Group, the average purchase price of new apartment in Prague has grown in the first quarter of this year by 8 % in comparison to the previous year – from 56.177 Czech korunas to 60.517 Czech korunas per square meter.

As mentioned in the forecast of trends in residential real estate in the Czech Republic in 2016, the stock of new apartments in Prague has been gradually declining. One of the main reasons for this phenomenon is the decline in building permits granted to real estate enterprises in Prague. According to Marcel Soural, CEO of the Real Estate Enterprise Trigema, imaginary scissors between number of freshly offered new apartments and sold apartments are constantly gaping. This gap is causing strong pressure which increases the prices of new apartments in Prague. The stock of new apartments has dropped in the first quarter of this year from 6.450 to 5250 new apartments. M. Soural states that the main causes of this situation are the lengthening period of legal procedures related to granting new building permits, uncertainty about future legal regulation of building permits and the absence of strategical plan for urban development in Prague.

Apart from the reasons mentioned above the tendency of raising prices for new apartments in Prague is also supported by very optimistic expectations of the future state of the Czech economy. Czech people are now prepared to take higher mortgages in order to buy a new apartments instead of using their savings and one of the reason for this change is the interest rate which now days enjoys the lowest rates ever.

In relation to the new apartments stock it is important to mention that small and middle sized apartments (up to 80 square meter) are more desirable now than ever before. This is especially significant in 2+kk disposition apartments which are the most preferred apartments in this category and therefor their stock is declining. These apartments are usually the first to be sold because they are the optimal choice for residence purposes as well as for investment purposed purchases (for renting intentions). For example in Prague 3 which is one of the most preferred locations for investors, these apartments currently constitute only 11 % from the apartments stock and their average price climbed to 62.767 Czech korunas per square meter.

It is estimated that 1.600 new apartments has been sold in the first quarter of 2016 in Prague which is 250 apartments less than in the previous year.

Graph illustrating the average price of new apartments in Prague (outside city center) in the period of 2013 – 1Q 2016