Czech Republic's housing market remains strong
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Loading... - Tereza Dvorak
- 14 Jul 2022
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Czech Republic’s housing market is still very strong, despite global supply chain disruptions and the economic uncertainty brought by Russia’s invasion of Ukraine.
The average price of apartments in the Czech Republic surged by 26.3% (13.5% inflation-adjusted) during the year to Q1 2022, after y-o-y rises of 25.8% in Q4 2021, 22% in Q3, 14.6% in Q2 and 11% in Q1, according to the country’s central bank Czech National Bank (CNB). In fact, it was the biggest y-o-y growth since the series begun in 2008.
On a quarterly basis, nationwide house prices rose by 5% in Q1 2022 (-1.2% inflation-adjusted).
During Q1 2022:
The average price of new dwellings rose by a record 29.8% (16.7% inflation-adjusted) – so that prices of new dwellings are now 128% higher than the previous Q3 2008 peak.
The average price of existing dwellings soared by 23.5% (11.1% inflation-adjusted) from a year earlier, or 101.5% above the previous Q3 2008 peak.
Nationwide house prices rose by more than 12% annually over the past six years, more than double the rise in wages. As a result, homebuyers in the Czech Republic need to pay 12.2 times average annual salaries to purchase a 70-sq. m. dwelling, the second least affordable housing among the European countries included in the 2021 study conducted by Deloitte.
“The Czech Republic recorded the second least affordable housing among the participating countries with an average of 12.2 gross annual salaries to purchase a standardised dwelling. In comparison to last year, this is an increase by almost two average annual salaries,” said Deloitte.
Despite this, demand remains robust. During 2021, the total number of apartments sold in Prague reached 7,170 units, up by 19% from a year earlier and 22% above the five-year average sales, according to JLL’s H2 2021 Prague Residential Market. In fact, it was the best showing since 2016 when 7,700 apartments were sold in the capital city.
Dwelling starts rose by 28.3% y-o-y to 10,832 units in Q1 2022, following a 27.6% increase during 2021, based on figures from the Czech Statistical Office (CZSO). On the other hand, dwelling completions were up slightly by 1% to 9,110 units in Q1 2022, after a miniscule growth of 0.5% in 2021.
The Czech Republic’s housing market is expected to continue growing this year, albeit at a slower pace due to rapidly rising interest rates, the imposition of tighter lending regulations, as well as the erosion of purchasing power due to high inflation.
Economic growth is expected to slow to 2.3% in 2022, following a 3.3% expansion in 2021, amidst the Ukraine crisis and heightened inflationary pressures, according to the International Monetary Fund (IMF). The European Commission released a more pessimistic 2022 growth projection for Czech Republic of just 1.9%.
Local house price variations
Within the capital city, Prague, the most expensive flats in 2021 were located in Prague 1 and Prague 2, with average prices of CZK 166,200 (US$6,992) and CZK 145,100 (US$6,104) per sq. m., respectively. They were followed by Prague 3, with an average price of CZK 123,800 (US$5,208) per sq. m. and Prague 7, with price of CZK 120,600 (US$5,073) per sq. m. Read More...
