LEXXUS:APARTMENT CONSTRUCTION RISING IN PRAGUE, CURRENTLY NO RISK OF OVERPRODUCTION

The number of started apartments in apartment buildings has been growing evenly since the biggest fall in 2012. 3,625 apartment were started and 3,641 apartments were completed last year in apartment buildings. This year in the first three quarters of the year a total of 3,033 apartments were started and 3,341 apartments were completed in the first three quarters of the year. A year-on-year comparison with the same period last year shows a 19% increase in started apartments and a 22% increase in completed apartments this year.
The increase in apartment construction is gradual and does not give rise to fears of overproduction. Construction is at values of under 4,000 completed apartments annually and corresponds to the continuing high demand for own housing.
In the near future we do not expect any noticable fluctuations on the real estate market, unless there is artificial administrative interference with its fragile balance, whether by the state administration or the EU. In our opinion the migrant crisis will in no way influence the apartment market in the Czech Republic. Concentrating a larger number of asylum-seekers could have a negative impact on local apartment prices and the establishment of new socially-excluded locations.

INCREASE IN OFFER PRICES OF APARTMENTS IS BECOMING MORE DYNAMIC

Whereas the average offer price of apartments in Prague exceeded the historical maximum from 2008 by 4% in the middle of the year, realised prices are not rising as dynamically as offer prices at all. The numbers of realised transactions this year are not, unfortunately, available. In the last two years the trend was very slight growth and from the minimum at the end of 2012/beginning of 2013 it was only 4.3%. In comparison with the increase in offer prices in the same period (8.9%), realised prices have only increased hesitantly. Such a widening between offer and realised prices shows, on the one hand, developers’ attempt to maximise their profits by increasing prices as fast as sales will allow, and on the other hand the possible unwillingness of buyers to accept pressure, despite the very favourable financing conditions.
Realised prices, in contrast to offer prices, are a long way from their historical maximum, which they are more than 18% below. The reason could be the availability of mortgage financing to a wider group of buyers, as well as the large range of apartments in the cheapest segment and record sales of them.

THIS YEAR HAS SEEN THE CHEAPEST INTEREST RATES IN HISTORY

This year average mortgage rates fell to a historical minimum of 2.05%. This opened up the chance of a lifetime to buy one’s one home on unusually favourable terms. Although it seems that the interest rate hit bottom in the middle of the year, it is still just over 2%. However, rates under 2% fixed for five years are not that rare in December. The lowest offered rate is currently 1.59%.
With regard to the high demand, banks expect that the total value of mortgages agreed this year will reach almost CZK 195bn, which will be a new absolute record. Together, retail and building savings banks will make housing loans worth over CZK 240bn this year.
The better-and-better shape of the Czech economy, low interest rates, renewed stable growth of property prices and people’s desire for new and better homes are the main engines behind growth on the housing market.
The average amount of a mortgage loan has risen by approx. CZK 200,000 year-on-year to the current CZK 1.87m.




http://www.lexxus.cz/public/media/Q3_2015_LEXXUS.pdf