Czechs see flat prices taking downward dive

After years of seeing their bricks and mortar assets rising in value, Czechs are now coming to terms with falling prices for flats and houses. But while gloom and doom mongers predict that a lot worse is still to come, some analysts can see signs of a recovery.

Figures this week from the Czech Statistical Office show that prices demanded for flats fell nationwide by 5.5 percent compared in the second quarter compared with the first. The decrease in Prague was around 1.0 percent lower and outside the capital 1.0 percent higher than that average.

The latest figures follow on from a 3.0 percent fall in the first three months of the year.

Ondřej Novotný is an analyst in Prague with international real estate consultants King Sturge. He says prices have been going down for all types of property.

“Currently all the discounts on the market are for most of the properties. I would not separate old and new ones. In general the most affected are the cheaper or lower standard projects in much worse locations.”

Outside Prague, he says there are still some exceptions to the downward trend.

Photo: archive of Radio Prague

“The situation in the regions is actually different. Some cities where the price level is still quite low, they are still having some price increases. In others, for example, Brno and Ostrava, I expect there will be more or less stagnation. In some smaller cities maybe the fall will be about 15 percent.”

The statistics come against the backdrop of a cautious Czech National Bank prediction that flat prices this year could fall by as much as 12.5 percent and separate warnings of a much more severe US-style crash by some real estate dealers.

One thing at least is clear, the bargain seeking West Europeans who sought Czech real estate a couple of years ago – followed by a wave of buyers from the former Soviet Union – have now almost completely disappeared.

Mr Novotný dismisses the most gloomy forecasts saying that the Czech market is basically stable and banks are still lending to buyers. And he sees some chances that prices will stabilise and could start to rise again in 2010 as flat buyers compete for the few new properties that will be coming onto the market. That prediction is, of course, built on the expectation that the country should by then be coming out of recession.