New flat prices continue to rise

Low supply and strong demand are driving growth in Prague

Prices for new apartments in Prague in the coming years are not expected to fall. Insufficient supply and strong demand, supported by economic growth and an increase in real wages are driving the prices. The attractiveness of the city also plays a role, as Prague has one of the lowest unemployment rates in Europe.

The average price of new dwellings sold at the end of the first half of 2017 was Kč 75,791 per square meter, up 15 percent year-on-year according to statistics by Trigema, Skanska and Central Group. In the past two years apartment prices have increased by more than one-third. Rent in the last two quarters has risen faster than apartment prices.

The stock of new dwellings in Prague at the end of June dropped almost a quarter to 3,600. In Prague, according to the Czech Statistical Office (ČSÚ), some 1,342 apartments in residential and family houses were built, an increase of four-fifths year-on-year.

Analysts say the growth in real estate prices will slow down, but the trend will not reverse. Only an unexpected economic or political crisis could force a drop in apartment prices, according to analysts.

Developers say that the long process for getting permission to build flats is a main cause for the lack of new supply. In Denmark, for example the process has only five steps, compared to 33 in the Czech Republic. It can take up to eight years to complete a project in the Czech Republic, although construction takes only two years. The rest is taken up by red tape.

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