Amendments to the new Building Act will complicate the property market
The new Building Act, whose preparation and finalisation took more than four years and which was due to come into force in mid-2023, will most likely be amended or at least postponed. However, no one knows the exact form these amendments will take, leaving the property market, including developers, in the dark. What will happen next, and how will it affect property prices?
Property prices have long been influenced by several factors, and while the pandemic situation of the past two years is one of them, the Czech Republic has long been troubled by another issue. “Approval procedures in the Czech Republic take an absurdly long time, even though there have been a total of 26 amendments since 2006, progressively amending the previous Building Act. For example, when discussing a standard permit for an apartment building in the capital city that is also compliant with the zoning plan, it is by no means unusual for developers to wait as long as ten years for approval,” says David Novotný, founder and managing director of the independent real estate company Bohemian Estates.
The company has also provided advisory services for investments in development projects since 2006. It now manages more than 2,000 flats in the Czech Republic and abroad, with a total value of CZK 15 billion. Bohemian Estates also specialises in property searches and due diligence, so its property experts have a front-row view of the situation in the property market, which is unsustainable for many. Current property prices and mortgage lending requirements are making home ownership an unattainable dream for an ever-growing number of people. “Demand has exceeded supply for some time, especially in major cities and their surrounding areas. The problem is that there are no new flats, and the Building Act, which was intended to speed up the approval process, will most likely be amended and postponed. At least that is what the new government, which we should have from mid-December, has indicated,” adds Novotný.
However, no one knows exactly what amendments the Building Act will undergo, and this naturally concerns developers. At present, they do not know which legislation they will have to follow in the future. The property market is therefore now facing further delays, which may again affect property prices. “While some predict that property prices will soon reach their peak, I would not be so optimistic. On the contrary, we can expect further increases for certain types of property. This will mainly concern flats, with prices potentially rising by around 10% over the next two to three years. We must not forget the dramatic rise in construction material prices, which must inevitably be reflected somewhere,” says David Novotný.
However, the situation favours property owners who had planned to sell. They now have an exceptional opportunity to realise the value of their investment. Conversely, Novotný advises caution when buying a property. “This is currently an unfortunate time, and property purchases must be approached with the utmost caution. Across-the-board price growth may also artificially increase the prices of properties that simply do not merit the asking value compared with other competing listings. When buying, I therefore recommend using a good real estate company that can identify and uncover any legal or construction-related shortcomings of a property. This is the only way to avoid buying a pig in a poke and losing money on the transaction,” concludes David Novotný on behalf of Bohemian Estates.