Many consider property price trends absurd. What can we expect in the years ahead?
Madness. That is how some people describe the current state of the property market and, consequently, property prices. Property prices have risen by just under 12% year on year, with the strongest demand continuing to be for cottages and recreational properties, as well as flats in new developments. Although coronavirus has partly contributed to the situation, it is not the only factor driving prices up.
In recent years, several circumstances have combined to make home ownership less accessible and drive prices up rapidly. A significant role in the process has been played, for example, by an increase in the VAT rate on construction work, rising building material prices, increases in the minimum wage, issues with municipal zoning plans and slow permitting processes. “Building permit procedures in the Czech Republic are painfully slow, and available statistics show that they take an average of 246 days. This means that it takes an ordinary citizen three quarters of a year from submitting an application simply to obtain the necessary permits. The whole process should be accelerated by the new Building Act, which was approved in mid-July. However, it will not come into effect until the second half of 2023,” explains David Novotný, owner and managing director of the independent real estate company Bohemian Estates International.
Other events of the previous year have also contributed to the property market situation in the Czech Republic, above all the abolition of property acquisition tax, the extension of the time test from five to ten years, the removal of DTI and DSTI mortgage parameters, and low mortgage loan interest rates. “It is also important to realise that, over the past year, many people have lost their jobs or found themselves in financial difficulty. This includes people who had otherwise enjoyed a very good standard of living, well-paid jobs and perhaps some savings. In short, many of us have lost our sense of security, raising once again the question of how it is really possible to secure one’s future. Naturally, people began to think more about property, which has long been regarded as one of the safest forms of investment,” says Novotný.
According to Novotný, investing in property continues to pay off; what is more, now may be the best time to do so. “If anyone expects coronavirus to subside in the coming year and everything to return to normal, they will probably be disappointed. The property market and high property prices are far from being only about the pandemic; this is a complex issue involving many factors. Further price increases are expected in the coming years, although they may no longer be as dramatic. So, if someone is planning to buy a property, I would slowly start the whole process now,” concludes Novotný, whose company has extensive experience in property investment.
Bohemian Estates International provides comprehensive advice on investments in commercial and residential properties and, in addition to finding and reviewing properties, also takes on the other aspects involved in looking after them.