Prague flat prices continue to rise

A combination of factors have made flats all but unaffordable

Prices for new Prague flats are continuing to rise, and the situation is not expected to change soon.

The average price of a new flat in Prague last year rose 18.6 percent to more than Kč 101,061 per square meter, according to combined data from developers Trigema, Skanska Reality and Central Group.

Mortgage restrictions have made flats almost inaccessible for many people.

Interest in living in Prague continues to rise, and many new buyers will have to compromise on location and size to find something affordable. Cheaper housing has virtually disappeared from the market, according to experts.

Prices began to rise rapidly in the middle of 2015, and compared to June 2015 they are currently up 82 percent.

The most expensive apartments are in Prague 1 at Kč 198,000 per square meter and Prague 2 at 164,000. The most affordable apartments are in Prague 4 and Prague 10, at slightly below Kč 89,000 sqm.

In all of 2018, developers in Prague sold 5,000 new homes, down 9 percent year-on-year.

It was the lowest level since 2012 and a drop of nearly 30 percent against the record in 2015, when 7,000 were sold. The largest share of the dwellings sold were in Prague 5 at 23 percent, Prague 9 at 20 percent and Prague 10 at 17 percent. The lowest was 2 percent in Prague 6.

Sales of new flats from developers are expected to drop again in 2019, to between 4,600 and 4,800.

Smaller flats are more expensive per square meter, but still cost less than larger flats.
Last year was the third year in a row that sales dropped. It was due in part to new legal restictions on mortgages as well as rising interest rates.

Developers claim that part of the problem is also a lack of new building permits, which keeps them from meeting demand.

The most expensive flats are 1+kk, or one room and a kitchenette, which cost an average of Kč 120,000 per sqm. Flats designed as 3+kk average at Kč 92,000 per sqm. Some 70 percent of apartments are sold at over Kč 90,000 per sqm. The price segment up to Kč 60,000 per sqm has all but disappeared from the market.

In Prague the highest annual office rents rose year on year by an average of 2.5 percent to Kč 6,300 per sqm per year. But this was half as much as in Munich, at Kč 11 345. Berlin was at Kč 10,142, followed by Vienna at Kč 7,913 and Warsaw at Kč 7,376. Prague was in fifth place in a survey by KPMG. Bucharest was cheaper, at Kč 5,685.

Year-on-year rental growth was the lowest in Prague and Munich last year. Warsaw's office rent increase was the greatest, at 4.3 percent.

The volume of real estate transactions, according to estimates in the Czech Republic, fell year-on-year by about one third to Kč 60 billion. Less than 60 percent was from domestic investors, and about a fifth was from German investors.

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