Prices of flats, mortgages, rental housing, the abolition of real estate acquisition tax, new building law…. These are key issues that are currently being addressed in the real estate market. Whether you are looking for exclusive housing in Prague, you are interested in investing in an apartment for rent or you want to sell your existing property profitably, you should closely monitor the current situation.
According to an analysis by the consulting company Deloitte published in early September, housing prices in the regional cities of the Czech Republic rose by 10.4 percent year on year in the second quarter of this year. Compared to the previous quarter of this year, prices were up 2.4 percent.
The average price per square meter in the past quarter was 67,000 crowns, while the most expensive were again apartments for sale in Prague, with an average price of 88,700 CZK / sqm. The year-on-year increase in prices in the metropolis was 5.3 percent. However, those interested in buying flats in Liberec (by 27.6 percent) and Ústí nad Labem (by 24.7 percent) felt the biggest increase.
The number of flats sold in the second quarter of 2020 was less than 6,200 units, which is a year-on-year decrease of 5.9 percent, and Prague accounted for about three-fifths of it. Of the total volume, about half were development projects, about 20% were brick houses and about 27% were blocks of flats. These showed the largest year-on-year increase in prices (15.3%). "Despite the situation with the coverage of Covid-19, we are registering great interest in buying apartments. However, we are beginning to observe increased caution of buyers, which is why the actual implementation of transactions is delayed. One group is more considering whether to make a purchase due to the crisis that their situation may worsen in the future. The second group speculates on a possible decline in prices in the coming period if a really economically-difficult period comes, "says Jiří Kučera, director of the Luxent-Exclusive Properties real estate agency.
The mortgage market broke the record in July this year. According to Fincentrum, Hypoindex became the strongest seventh month in its history. The July volume of 21.597 billion meant a year-on-year growth of more than six billion. Compared to June this year, it was an increase of 650 million. Although a slight decline to 19.173 billion was recorded in August, according to the monitored data of the Hypoindex, August still became the strongest eighth month in history. At the same time, the interest rate fell for the fifth month in a row. The average interest rate was 2.11 percent in August, while in July it was 2.15 percent.
As for the average value of mortgages, it rose to its all-time high in August – almost 2.8 million crowns. Jiří Kučera, Director of the Luxent – Exclusive Properties real estate agency, adds: “The increase in the average amount of mortgage loans provided, especially in the last year, is the result of several phenomena on the Czech real estate market. The main thing is the constantly rising real estate prices when even the events related to the situation around the Covid-19 disease did not stop this growth. Relatively optimistic expectations of the development of the economic situation in the Czech Republic before the pandemic in 2019 stimulated interest in mortgage loans. In the spring of this year, another impetus was the easing of the Czech National Bank's restrictive measures for their provision."
The abolition of the real estate acquisition tax, which amounted to 4% and thus meant a significant amount of tens to hundreds of thousands of crowns for buyers, has a significant effect on the real estate market. The tax will expire retroactively from March 31 this year and applies to people who completed the cadastral deposit in December 2019 or later. Its abolition has the greatest impact on the secondary market, ie older real estate because new buildings under 5 years of age were not affected by this tax.
In the original government proposal, it was assumed that for new housing loans granted after 1 January 2022, buyers could not deduct the interest paid from the income tax base. Due to a wave of criticism, an amendment to the Senate was finally approved, which maintains the deductions and only reduces them to CZK 150,000 from that date. The law has already been signed by President Miloš Zeman.
The situation in the rental market is somewhat different. The offer is growing, especially in the center of the capital, as clients from abroad have decreased due to the pandemic and travel restrictions. This is associated with a significant drop in prices. You can easily rent luxury apartments in Prague even 10 percent cheaper year-on-year. In addition, landlords who previously offered apartments for short-term rent (for example via the Airbnb service) are now choosing a longer-term option to curb tourism. Thanks to the greater availability of lucrative locations and lower prices, interest in rental housing are rising.
In August this year, the government approved a draft of a new building law from the workshop of the Ministry for Regional Development, headed by Minister Klára Dostálová (for ANO). It should mainly reduce the permitting process, from an average of 5.4 years to one year, and make construction more efficient overall. The Ministry of Regional Development would like to bring the law into force in the spring of next year. The effectiveness should then gradually take place by mid-2023.
The bill now has to pass through the Chamber of Deputies, where a great struggle for its form is expected. The opposition in particular has considerable reservations, which seem unresolved. Prague and the Institute of Planning and Development do not spare criticism either, as the law intends to repeal the Prague Building Regulations. Prague Building Regulations has been an implementing regulation to the Building Act since 2016 and sets out general requirements for the capital city of Prague.
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