It is mainly older properties that are becoming cheaper on the property market. However, prices remain overvalued

Property prices remain inflated; the central bank may intervene

“Since the beginning of this year, we have witnessed a downward price trend affecting mainly flats and family houses, in virtually all regions of the Czech Republic. Building plots resisted this pressure for a long time, but in recent weeks their prices have also started to move downwards. Nevertheless, according to a report by the Czech National Bank, properties on the Czech market remain overvalued – even the falls in market prices in recent months have not helped,” says David Novotný, owner and managing director of the real estate company Bohemian Estates. If the central bank concludes that the level of overvaluation is too high, it may use one of its macroprudential tools to strengthen financial stability. This often involves changing lending indicator settings, as was most recently the case in April last year.

“The long-term lack of housing affordability in the Czech Republic is driven by high interest rates on housing loans, strict bank screening requirements for obtaining them and, of course, inflated property prices. These factors have a fundamental impact on the property market and also drive it, as they affect not only prices but also the supply of properties and people’s willingness to invest in owner-occupied housing. The Czech Republic is still regarded as a country where people strongly prefer home ownership, so many potential buyers may have reconsidered their planned investment. As it appears, postponement of this major life decision is continuing,” adds Novotný.

Prices are falling across all regions, most notably for older flats

Market price falls have so far affected older properties most of all. “Owners of older, unrenovated flats for sale have had to abandon their high expectations and adapt to the current market situation. They have begun cutting prices significantly – over the past year, asking prices in this property category have fallen by up to ten per cent. We are talking about public asking prices here; actual prices may be somewhat lower still,” says David Novotný of Bohemian Estates. Naturally, prices vary from region to region, with the largest reductions seen in the Pardubice Region. Prices have been falling for the second consecutive quarter, although experts expect stagnation and the current price level to be maintained until the end of the year.

Interest in flats in prefabricated panel buildings is also beginning to rise, as they represent a popular alternative to new builds. Their price is usually lower than that of new flats, so no decline in demand is expected. The price decline has already reached double digits and, given the current economic situation, high mortgage rates and strict lending rules, the market is changing and buyers are beginning to set prices. Sales are falling and there are significantly fewer prospective buyers who can afford a purchase than in previous years.