In the Czech Republic, apartment prices are declining: the reasons
The European real estate market shows a slowdown since 2022, and in 2023, this trend continues. The fall has affected the Czech Republic. In Prague, apartment prices have fallen to 2021 levels. Since the 4th quarter of 2022, the value of the object of 65 sq.m. decreased by about 28,490 euros. Analysts also note an increase in the difference between the prices on the secondary market and new construction.
If in the first quarter of 2022, the cost of an apartment in the Czech capital was 5,150 euros per square meter, in the fourth quarter this figure dropped to 4,720 euros per square meter.
A similar situation was observed in Brno, where housing in a similar area lost in value by almost 20 thousand euros. Here a square meter has fallen to 3680 euros.
On average, an apartment in the Czech Republic is worth 3440 euros per square meter, and at the beginning of 2022, this figure was 3790 euros per square meter.
The main reason for the price decline in the real estate market, experts say, is the decline in purchasing power and high-interest rates. In addition, there is a lack of institutional investors in the sector. At the same time, sellers often want to close the deal as quickly as possible and are willing to make a significant reduction in the initial price.
Most often the drop in value is observed when the housing has flaws, such as the need for repairs, or it is located in an unpopular area. Apartments in Prague and Brno, which are located in good areas, do not show price drops.
As for the rental sector, it has slowed down significantly in the Czech Republic since 2022. However, the Prague and Brno markets are still in demand. In the capital rents in the 4th quarter of 2022 increased by 4%, a square meter here costs 14 euros per month. On average, you need about 900 euros a month to rent a 65-square-meter apartment. In Brno, the increase in rates is 2%, and the rent of a similar apartment will cost 775 euros per month.
Since November 2022 these two cities have recorded a decline in demand for new buildings. At that time the drop was 75%, which was the maximum since 2008. Now the situation has stabilized, but not significantly.
The reason for the decrease in demand is an increase in interest rates, which amount to approximately 6%. This led to a decrease in the volume of mortgage loans: during the year their number decreased by 80%. Accordingly, the demand for new buildings has decreased – according to Ekospol, now it is the lowest in the last 15 years in Prague.