The property market – war replaces the pandemic
As recently as the end of last year, experts predicted that, after the turbulent year of 2021, the property market would calm down and develop steadily. Those expectations have proved unfounded, and it is already clear that this year will bring little calm to the overheated property market. Last year, developers reported record demand and sales – flats were selling even at historically high prices. After the pandemic, we are witnessing another unprecedented situation. The war in Ukraine will undoubtedly affect the Czech property market, particularly through its impact on the European economy and the introduction of anti-Russian sanctions.
David Novotný, owner and managing director of the real estate company Bohemian Estates, summarises the main impacts of the current situation on the property market. “It is still too early for any firm predictions; however, we can already anticipate movements in the property market that will be linked to further price increases. At the beginning of this year, analysts were predicting that the turbulent situation in the flat and house market would calm down, forecasting only modest price growth in the single-digit percentage range. Everything is different now, and new scenarios need to be modelled. On the one hand, we are seeing an increase in the long-insufficient supply on the property market – under the weight of sanctions, Russians are selling off their properties on the Czech market. On the other hand, we are seeing increased pressure on the rental market, as hundreds of thousands of refugees from war-affected Ukraine are heading to the Czech Republic,” explains Novotný.
The mass departure of workers from Ukraine, who had until now been employed in construction, is also beginning to have an impact. Add to this the dramatic rise in the cost of inputs such as energy, as well as disruptions to supplies of expensive commodities, and it is clear that the outlook will not be rosy this year either. “Under the pressure of rising inflation, we expect the Czech National Bank to raise its base interest rates further – as a result, it is highly likely that mortgage interest rates will also increase,” says David Novotný of Bohemian Estates. The Czech market is already seeing increased demand for rentals from Ukrainian citizens, which will lead to greater interest in property investment in the future. In connection with rising inflation, people will seek every possible way to prevent the devaluation of their savings and financial assets.
However, the crisis caused by the war in Ukraine is working differently from the pandemic in its early stages. The initial shock of the pandemic froze the entire market, whereas the war is instead setting the flat and house market in motion. Russian capital is leaving the Czech Republic, bringing more properties onto the market, particularly in Prague and Karlovy Vary. However, this is not enough. “I do not expect this to bring a significant revival in supply. Even before the war began, our market was short of hundreds of thousands of residential units. Dozens or low hundreds of listings for available properties following the outflow of Russian capital cannot miraculously remedy this. The crucial issue is the rising cost of new-build construction, which may in some cases result in the temporary suspension of projects already under way. The causes include disruptions to steel, iron and other material supplies, rising energy prices and a declining workforce,” Novotný adds.