This is why apartment prices in Prague will continue to rise over the years to come

Post date: Sep 29, 2018 6:59:14 PM

This is why apartment prices in Prague will continue to rise over the years to come 

Those following our site know that in most cases our predictions turn out to be accurate. This is not because we have been blessed with the gift of prophecy, but primarily because of our excellent familiarity with the Czech market and our extensive experience of many years in the country.

Today, after several years of in which the real estate prices in Prague and its environment (10-15% on the average per year) have risen we wish to discuss the reasons for this trend, and especially about the chance they will continue. 

The bureaucracy is the primary culprit for the rising prices of residential real estate in Prague 

The Eurostat data shows a clear trend since the fourth quarter of 2015 of a rise in residential prices throughout Europe, so that the Czech residential real estate market is merely the vanguard of this trend. The real estate prices in the Czech Republic have registered the highest rises in Europe in 2017. The source of this data is the Financial Stability Report of the Central Czech Bank from June 2017. 

The Czech Economic Research Institute (CETA) published a study focusing on the residential real estate market in Prague. The study identified bureaucratic delays and high demand as the primary culprits for the housing shortage in Prague. As of now, there are plans for the construction of 40,000 additional residential units in Prague and the study found that any delay in the construction of 1000 units leads to a rise of 1.18% in real estate prices. 

In spite of the prevailing opinion, the increasing use of Airbnb apartments in Prague is not responsible for the price hikes. The research manager Aleš Rod has stated that "The influence of Airbnb is not as great as is commonly thought. In fact, the core of the rise in real estate prices is based on a combination of immigration into Prague, a small number of apartments being built, and macro-economic indicators of economic growth such as high wages, low interest and mortgages".

That is why the research manager sees a loosening of the requirements to acquire building permits the best manner to slow down the rise in real estate prices. He claims that Prague is the sixth richest area in Europe, so that the construction of new apartments is absolutely essential. He claims that there are two manners to stabilize the real estate market: efficient development of underutilized areas and rezoning agricultural areas for residential unit construction. Nonetheless, the study determines that such tools require investment in infrastructure in order to avoid the development of a real estate bubble. 

However, Aleš Rod also believes that in the near future no change is likely, so that the upcoming years remain a good opportunity for investment in Prague real estate. He has stated that "given the slow pace of municipal legislation in Prague, no significant change is expected prior to 2022, so that price rises are likely to be at the same level as in the previous two years."

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