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The Czech housing market is showing the first signs of recovery

04.09.2024
Homesoverseas.ru editorial office
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As macroeconomic conditions improve, the Czech housing market is showing the first signs of a recovery in sales and credit activity, while a shortage of new supply is putting upward pressure on prices, according to the Global Property Guide report.

According to the latest data from the Czech Statistical Office (CZSO), the Czech residential real estate price index increased by 1.18% year-on-year in the first quarter of 2024, which was the first positive result since the beginning of 2023.However, adjusted for inflation, the indicator still decreased by 0.89%, although this decrease was significantly less than the average inflation-adjusted decrease of 11.15% recorded for the four quarters of 2023.

The average price per square meter in Prague in the 1st quarter of 2024 was 92,000 Czech crowns, or 4301 US dollars (+7.70% year-on-year). The highest growth was recorded in Ostrava - 1936 dollars (+14.62% year-on-year), Olomouc - 3209 dollars (+14.53%) and Pardubice - 2936 (+11.88%).

The average price per square meter in new buildings in the capital is 132,928 Czech crowns, or 5,757 US dollars (+9.41% year-on-year).

Market history

Since the country's accession to the EU in 2004, the Czech housing market has seen significant growth due to economic integration and growing interest from foreigners.Initially, restrictions on the purchase of real estate by citizens of other countries restrained this demand, in 2009 these obstacles were removed.

The years 2006-2008 were marked by the peak of housing construction, more than 43,700 new housing units were commissioned annually.However, the global financial crisis of 2008 put an end to this boom, causing a subsequent decline in both housing prices and construction activity. 

By 2014, the market began to stabilize, and real house prices began to rise again. In 2021, prices for apartments and houses increased by more than 25% year-on-year, helped by strong economic growth, low interest rates and growing demand.

However, the rapid rise in prices raised concerns about overheating of the market, and the National Bank reacted by tightening monetary policy by raising interest rates. The COVID-19 pandemic initially caused uncertainty, but the market remained resilient due to continued demand and Central Bank measures temporarily easing lending rules and lowering key rates to support the economy.

By 2021, inflationary pressures prompted CNB to raise interest rates again, which began to cool the market.By the end of 2022, although nominal prices continued to rise by 6.93% year-on-year, inflation-adjusted prices fell by 7.58%. The trend continued in 2023, when both nominal and real prices declined, reflecting the continued impact of high inflation and increased costs on loans.

Starting from the middle of 2023, market activity is gradually returning.

Source: Global Property Guide

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