How will the property market develop next year?
The past two years in the property market have been unprecedented in many respects. We saw a sharp rise in property prices, while mortgages also underwent changes. As a result, interest in buying owner-occupied homes declined and people began to favour rented accommodation. Prices have now been stagnating for several months, and in some places they are even falling, albeit not significantly. What can we expect next year?
Property experts are reluctant to make specific predictions, but the available data from the Czech Statistical Office offer some indications. In the third quarter, the index rose by just 2.4% compared with the previous quarter. Its development therefore does not yet suggest that falling property prices will lead to a long-term recession. But will prices fall further? In the first half of the year, this seemed inevitable. It is no longer so clear. The market is largely stagnant and, yes, some properties are becoming cheaper. However, these are more random fluctuations than a general trend. “Sellers still expect and demand prices from before the war in Ukraine, while buyers expect prices to fall. But it is not certain that they will,” adds David Novotný of the real estate company Bohemian Estates.
He also points out that cutting the price is certainly not the only way to sell a property. Instead, it is necessary to target the right clientele and choose an effective sales strategy. Mortgages themselves are also an issue. “People either cannot qualify for a mortgage at all now, or do not want to take one out under the current conditions. It is therefore worthwhile offering the property to investors as well, as they have financing arranged and currently see great potential in rental housing,” Novotný adds.
Banks are also gradually responding to the mortgage situation. For example, Česká spořitelna recently announced the option of transferring a mortgage with its original interest rate to the buyer. Other banks are not opposed to this option either, and in theory this approach could help revive the mortgage market, which is closely linked to the property market.
Rental housing, which is already in high demand, will continue to strengthen next year. Rent increases can be expected in some locations, although they should not be significant. This is good news for those with available funds. If they finance most of a property from their own resources, it can begin generating income almost immediately. Naturally, this also depends on several other factors, such as the location, layout, fittings and whether reliable tenants who pay regularly can be found.
This raises the question of whether it would be worthwhile entrusting the management of a rental property to a real estate company. Data show that professionally managed properties are occupied more often and earn more on average.
The property market is also expected to face considerable uncertainty next year due to major fluctuations in energy and construction costs. “Nevertheless, new construction will continue, mainly in the residential segment, where there is a long-term shortage. There certainly will not be too few flats. The question is whether anyone will be able to buy them,” concludes David Novotný of Bohemian Estates.