Study: Demand for new flats in Prague set to keep outstripping supply

Foto: U. Leone, Pixabay / CC0

Demand for new apartments in Prague is set to rise by 3.4 percent year-on-year in 2020, while the number of available properties will increase by only 1.4 percent, suggests a survey of 40 local developers conducted by CEEC Research and cited by the Czech News Agency.

Photo: U. Leone, Pixabay / CC0
Next year demand for new flats should climb by 3.1 percent year-on-year but supply will be only 0.8 percent higher, the new report found. The developers say they expect interest in renovating older apartments to climb in future.

The director of Geosan Development, Petr Beneš, told the Czech News Agency that the slow pace of acquiring construction permits meant that developers were unable to respond flexibly to the current high demand on the property market.

The Czech government has pledged to speed up and simplify the permits process with a new construction code that should take effect from next year.

However, the planned legislation is not without its critics, with a common complaint being that it plays into the hands of developers but does not protect the public interest.

Some experts have even dubbed the legislation unconstitutional, highlighting the fact that it is being pushed through at unusually high speed.

For their part, developers say they expect some of their most attractive home construction projects in the coming years to be within driving distance of Prague.

They also believe that apartments of 60 square metres or less and properties bought to rent out will be in particularly high demand. By contrast, flats over 100 square metres in the centre of the capital will be the least sought after, they say.

Almost three-quarters of the developers questioned said they perceived the fall in the availability of homes to buy, stemming from high apartment prices and tighter mortgage conditions, as a problem.

The director of the Association of Developers, Tomáš Kadeřábek, said the overall situation regarding availability of homes to purchase was so dire that the government needed to take action wherever possible.

The state must ensure the availability of financial instruments for young families to acquire their own housing, Mr. Kadeřábek said, adding that it also needs to smooth administrative processes and help provide a sufficient workforce so construction can be cheaper.

According to data from the development companies Trigema, Skanska Reality and Central Group, the sales prices of new apartments in Prague increased by 11.5 percent year-on-year at the end of October to CZK 106,713 per square meter.

There was a turning point in Prague new apartment prices in mid-2015, the Czech News Agency said. At that time, they had risen by 2.3 percent in two years. Since then they have climbed by no less than 92 percent.

In addition to slow building permits, analysts cite the rising prices of land, construction work and materials, as well as a high tax burden, as the cause of this whopping increase.