“No end in sight” for inflation on Czech housing market

Apartment and house prices in the Czech Republic increased by an average of 11.9 percent year-on-year in the first quarter of 2021, after rising by 8.9 percent in the previous three-month period.

Czech property prices thus grew by the fourth highest rate in the European Union in the first quarter, just as they had in the preceding period, according to data just published by the European statistics agency Eurostat.

The chief analyst of ČSOB bank, Petr Dufek, told the Czech News Agency that there was no end in sight for inflation on the Czech real estate market, saying there was little chance that price growth would remain moderate.

Photo: Filip Jandourek,  Czech Radio

Mr. Dufek said neither the pandemic nor the economic downturn associated with it had impacted the upward trend in property prices on the domestic market.

The fastest EU-wide price growth in the first quarter was seen in Luxembourg, where it hit 17 percent. Denmark followed on 15.3 percent, ahead of Lithuania, which was just in front of the Czech Republic on 12 percent.

Compared to other EU countries, real estate prices grew fastest in the Czech Republic from the last quarter of 2016 to the end of the third quarter of 2017.

The highest growth came in the second quarter of 2017, when the average cost of apartments and houses in the Czech Republic rose by 13.3 percent year-on-year. This was more than three times higher than average EU growth at that time.

Even if housing prices in the Czech Republic were to stagnate for the rest of this year, they would still be on average 8.4 percent higher than last year, ČSOB’s Petr Dufek said.

Petr Dufek | Photo: Jana Přinosilová,  Czech Radio

On average, apartments in the Czech Republic are now 67 percent more expensive than they were in 2015. This rate of growth has only been exceeded in the European Union by Hungary and Luxembourg, Mr. Dufek said.

According to Trinity Bank analyst Lukáš Kovanda, demand for real estate in the Czech Republic is still strong due to the economic prosperity felt between 2014 and 2019.

During that period the purchasing power of the Czech population increased significantly, and Prague in particular became even more connected to the global real estate market, Mr. Kovanda said.

The growth of real estate prices in the Czech Republic shows a long-term growing trend, which, on top of relatively weak supply, is essentially due to the ongoing process of the Czech Republic’s macroeconomic convergence with richer European Union states, the Trinity Bank representative said, adding that the process was set to continue.