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What factors develop the cost of apartments in Prague in the third quarter of 2018

What factors develop the cost of apartments in Prague in the third quarter of 2018

As of the beginning of November 2018, the cost of apartments in Prague has not decreased, only the growth rates have decreased.

In our previous reviews, we provided our readers a kind of prediction made about the cost of new apartments in Prague that could have exceed the psychological 100 thousand CZK, referring to many factors that clearly are not in favor of real estate buyers, namely:

  •    new rules for providing mortgage  as a result of overheated  mortgage market. Read in more detail here.

In their calculations, the mortgage banks use their own, non-linear 100-point scale for assessing the change in the cost of new apartments in Prague. The difference between the second and third quarters was 2.8 percentage points – there was a slight increase. But in the year-to-year comparison, the scale has already reached 137.4 points, which means that the cost of apartments in Prague has increased by 25%.

  •     a difficult situation with the issuance of permits for the construction of new apartments by developers and, as a result, a significant excess of demand over supply.
  •     high investment attractiveness of new apartments for rent, especially in Prague. Investors are willing to pay a high price, because it is known that any real estate is the best long-term investment. Young people who work in Prague are willing (obliged in a way) to pay up to 40%, very often and up to half of their earnings for renting an apartment.

Outside Prague, families who rent housing are willing to pay for rent no more than 1/3 of their earnings, in Prague this ratio often reaches 1/2. Therefore, very often, many of those who work in Prague are going to change jobs for higher salary, some of them are even going to change their profession.

Currently, according to information from the development companies Trigema, Central Group and Skanska Reality, the cost of apartments in Prague has stopped  at around 90,000 CZK per square meter.

We can expect that until the end of 2018, the cost of apartments in Prague will remain at its current level, while the prices themselves will differ somewhat based on usual factors:  transport accessibility, Prague district, and infrastructure.
As part of the Metro Index 2018 project, a study was conducted on how much the cost of apartments in Prague at different metro stations of A, B and C subway stations varies.

The highest cost of apartments in Prague is in proximity to line A (an average of 95,000 CZK), then there is a slight difference in the cost of apartments on line B and C (~ 85,000 CZK).

As a rule, the cost of apartments in Prague is changing in the smaller direction towards the end stations in both directions, but there are some exceptions. For example, in the direction from the line A station “Dejvická” to “Bořislavka” and “Nádraží Veleslavín” the cost of apartments in Prague is increasing despite the gradual distance from the city center. The most affordable properties near the metro station line “Letňany”. Here, a square meter of housing in the primary market costs only 55 thousand crowns, and the quality of construction meets all standards, including for energy saving. In addition, the area ” Letňany ” is a very joyful area, all the houses have a different colour, and the infrastructure is surprisingly developed.

Some interesting data on the cost of apartments in the very center of Prague.

Next to the station “Malostranská” apartment of 80 sq.m. It is sold at almost 15 million CZK, which is 187,000 CZK per 1 sq. m. In just 1 year, the cost of apartments in the very center of Prague has grown by 30%.

Recently, such apartments were sold in a poor way, because they are available on the secondary market only and many of them do require major repairs. To the surprise of Prague people themselves, such apartments always find well-to-do buyers and now they receive huge profits from short-term rental.

Summarizing, we can say that every year it becomes more and more difficult for buyers to buy apartments with a mortgage even with a good income (approximately 50,000 for two family members after paying all taxes). Czechs complain that it will be difficult for them to help their children with the purchase of their own housing, so their children will have to live in the parent’s apartment at least until they reach the age of 25.

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