2021 ends in Prague with new apartment prices at a record high
The trend of recent years, which peaked in 2020 with apartment prices in Prague, continues. The residential real estate market in Prague keeps breaking records, and the number of available apartments is now at a historic low.
Currently, new apartments are offered at an average price of 137,000 CZK per square meter. For “off-plan” apartments, the price is already approaching 160,000 CZK per square meter. By the way, Prague is not alone. Prices are also rising in other regions. In Brno, for example, new apartment prices are nearly catching up with those in Prague.
The construction companies Trigema, Central Group, and Skanska published the current analysis of the residential housing market for Q3 on 26.10.2021: “Recently, unfortunately, we are witnessing an unprecedented decline in the supply of apartments. Although new projects are being launched for sale, they are far from meeting the demand,” said Marcel Soural, owner of the Trigema Group.
The enormous demand for new apartments in Prague during 2021 exceeded supply in Q3. According to developers, 6,100 new apartments were sold during the first three quarters of the year – about 5% more than in the entire previous year. By year’s end, developers expect around 7,500 apartments to be sold.
As a result, the number of available apartments continues to decline. The lowest current number stands at 2,750 available apartments – a 51% drop compared to the same period last year.
According to developers, the drop in apartment supply is contributing to continued price increases. “In addition,” says Marcel Soural, “in today’s market, pricing for construction work and materials is very complicated. Suppliers are passing their increased costs on to investors. But we believe this will eventually stabilize.”
“Since 2015, the prices of new apartments in Prague have more than doubled, and the pace of increase is accelerating again. Over the past year, a sharp rise in construction and material costs has contributed to this, but the main reason for the price hike is insufficient construction over time due to slow permitting processes,” says Dušan Kunovský, owner of Central Group.
The comparison between the average apartment price and the average mortgage amount is also interesting. A 70 m² apartment in a new project costs about CZK 9.5 million at CZK 137,000 per square meter, while the average mortgage amount is CZK 3.1 million.
According to Soural, this points to a developing trend where new apartments are increasingly being purchased by larger investors who have available cash. Although this is not yet clearly reflected in sales statistics, he believes the ratio between small buyers and large investors may already be about 50/50.
Rentals in Prague in 2021
“The rental housing market is becoming attractive to companies and investment firms. Currently, there are 72 such rental projects on the market, totaling around 3,000 apartments,” says Soural, adding that interest from large institutional investors is growing.
In new development projects, large players are already buying about one-sixth of the apartments. Older apartments and second-hand units reflect the condition of the new apartment market. Supply of these has dropped below 4,000 available apartments in Prague in Q3, most of them in Prague 5.
Prices of second-hand apartments are approaching those of new apartments. According to investment companies’ analysis, the average price of a second-hand apartment in Prague 5 has increased by an additional CZK 1 million, now reaching CZK 9.2 million.
