"Market is down by about 5, 10 or even 20 percent": Flat prices falling in Czechia
"Market is down by about 5, 10 or even 20 percent" - Flat prices falling in Czechia
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Flat prices went down for the first time since 2013 in Czechia in the last quarter of 2022, according to the index of Hypoteční banka, a daughter company of ČSOB bank. The index suggests that the cost of an average flat fell by 0.7 percent in quarter-to-quarter terms. However, real price decline may actually be far higher than the statistics indicate.
According to Martin Vašek, the chairman of the board at Hypoteční banka, the last quarter price decline was indicative of a deeper trend noticeable since the middle of 2022. This was caused by a combination of high interest rates, the low availability of housing and the overall economic situation.
Robin Petrásek is the CEO of Expats Finance, a mortgage advisory firm aimed at foreigners living in the country. He says this decline in prices will likely continue for some time.
“I think that we will be seeing this for a while. It’s not going to be a huge down trend, but I don’t see it changing direction. The main driving factor are the high interest rates. I think it’s safe to assume that when the rates get better, for example 3 or 4 percent which might take two or three years perhaps, then demand will most likely increase because it won’t be as expensive to borrow money and people will be motivated to buy again.”
Having looked at data from the land registry, he also believes that the real decline in property prices is far higher than the index suggests.
“I believe that the market is down significantly more than they say. They say that it went down by 0.7 percent when compared to the last quarter. However, I believe that in reality and I can confirm this from first-hand experience, the market is down by about 5, 10 or even 20 percent in some areas. For example in December, the average real price was 6.2 percent below the advertised price.”
The price of houses continued to grow in the last quarter, but slowed down when compared to the autumn period from 2.6 to 1.8 percent, according to the index. The price of land grew by 4.5 percent in the last quarter of 2022, meaning a rise by more than a fifth when the whole of last year is taken into account. Meanwhile, the volume of new mortgages provided in 2022, when compared to the previous year, fell by nearly two thirds, according to an analysis conducted by Expats Finance.
Asked about how these trends are affecting foreign buyers, Mr. Petrásek says he thinks that they are less impacted than Czechs for two reasons.
“First of all, expats coming from abroad are likely to be used to high interest rates at home already. When you look at countries such as Turkey or India, and we have a lot of buyers from India, the rates there are around 10 or 12 percent. A 6 percent interest rate here is therefore not so bad. Furthermore, a typical expat earns more than Czechs on average.
“If we compare the number of expats to the number of Czechs on the market, then I would say that the percentage of buyers is now getting higher in favour of expats rather than Czechs.”