Czech Real Estate Market Forecast for 2014
Following the decline in real estate prices in Czechia due to the economic crisis over the past five years, 2013 appears to have marked the end of the downturn, with a slight increase in home purchases across Czechia in the last quarter of the year. This boosted demand and contributed to a modest rise in average prices. The increase was led primarily by small apartments in major cities such as Prague.
Reasons for the Rise in Property Prices:
- Record-low mortgage interest rates. Low rates encouraged investors to purchase apartments, resulting in a record number of mortgage refinancing cases in 2013. Expectations for continued low rates throughout 2014 are likely to further support property purchases.
- The Czech National Bank’s decision to weaken the local currency. The weakening of the Czech koruna against the euro and the dollar, announced in December 2013, is expected to attract foreign investors to bring capital into Czechia.
- Improvement in the EU economy. The recovery of the European economy positively impacts Czechia, which is part of the EU and conducts most of its foreign trade with EU countries.
- Investors’ realization that real estate prices have stopped falling. Until recently, many investors were hesitant to buy, fearing further price drops as seen over the past five years. Now that prices are beginning to rise, it’s seen as the right time to enter the market.
Factors Balancing Property Prices
On the other hand, there are balancing factors that keep the market growing moderately, preventing price spikes and excessive demand.
- The real value of wages in Czechia has significantly eroded in recent years, generally leading Czechs to invest less.
- New tax regulations for development projects. These have significantly increased land costs (for example, the imposition of VAT on land purchases for construction).
In Conclusion
Real estate experts estimate that if these trends continue into 2014 and interest rates remain unchanged, property prices could rise significantly—by around 4% in 2015. Therefore, those who act quickly and purchase property in Czechia at the start of 2014 are likely to enjoy a notable increase in asset value in a relatively short time.
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