Recent data show that real estate pricing in the Czech Republic is becoming increasingly cheaper. However, this price drop does not only affect flats and family houses but also building plots where the average price per square metre on an annual basis has dropped by 7%. The average price of building plots in the Czech Republic is CZK 2.8 million, corresponding to CZK 3300 per square metre. On the other hand, prices are lower outside Prague, in and around Brno: the average price is CZK 2.1 million, corresponding to CZK 2,300 per square metre.
Freezing demand
According to RE/MAX G8 real estate broker, Iztok Toplak, the main cause of this price drop is a freeze in demand due to expensive mortgages, high mortgage interest rates and high construction costs. The latest costs revolve around CZK 5 to 7 million, which, when added to land costs of around CZK 2 million, leads to a sum of CZK 9 million, of which it is almost impossible to obtain a mortgage. In fact, it is more profitable to buy a house that has already been built and then renovate it than to buy a plot of land.
Prague
The only exception to falling prices in the Czech Republic is the city of Prague, where the price per square metre continues to rise. According to the HB Real Estate Price Index, land prices continued to rise in the first quarter of this year, while prices for houses and flats are decreasing. In the land sector, demand continues to strongly outstrip supply: prices compared to the previous quarter have risen by almost 4 %, while compared to last year they have increased by a fifth.
On the other hand, the situation for flats and houses is different: prices have fallen by 2.5 % compared to the previous quarter. Interest in large properties and second homes is falling sharply. Recently, demand has developed for smaller houses because they are more affordable and less energy-demanding.
Price gap
A further cause of falling prices is the variation of the offer price compared to the actual sale price: in some cases, sales negotiations lead to a variation of tens to hundreds of thousands of CZK. The Gap in 2023 increased to 13% compared to 2% last year. This price difference is greatest in the regions of Vysočina and Karlovy Vary, where there is an average annual variation of 16%.
The time to buy is now
Compared to 2021, sales in the real estate sector have fallen by 30% due to expensive and unaffordable mortgages: supply exceeds demand and building land for sale is on the rise. Therefore, buyers are in an advantageous position to buy. Those who decide to wait for more favourable interest rates may miss out on current property prices that are hundreds of thousands to a million less than at the beginning of 2022. In addition, if one wants to wait for another drop in real estate prices, there is the risk of facing strong competition from interested parties. In fact, the problem of housing availability and lack of flats in the Czech Republic persists and interest in the real estate market will certainly not decrease.
sources:
https://www.century21.cz/cas-na-koupi-nemovitosti-je-ted-trh-se-pomalu-probouzi-47
