There are several first rankings on which the fellow citizens would not want to find a nation, for example regarding the accessibility of the national health services or job opportunities. While other voices, would like to be admired at the bottom of these charts and one of these is the price of real estate investments. With a pace never recorded in the past, the real estate market in the Czech Republic is increasingly unsustainable to be defined as “without control”.
This increase, as reported by the European Statistical Office, is part of a general price growth resulting in the largest annual climb since the fourth quarter of 2006 in the Eurozone and the EU since the third quarter of 2007. The constant rise of prices makes this Country one of the most inaccessible of the continent, third only behind Estonia (+16.1%) and Denmark (+15.6%). The comparison with the two nations is hardly respectable, because, the convergence of Czech house prices like the richer countries is not supported by an equal increase in wages. The results of Eurostat, which suggest a situation just getting worse, mean that the aspiration to own a house is becoming an impossible dream for many.
Compared to the first quarter of the year, between April and June house prices rose by 2.6% in the Eurozone and 2.7% in the EU.
The experts, therefore, agree on the unsustainability of a property market where prices are growing faster than other European countries. In a generalized worldwide boom, which seems at the moment unsuccessful. In detail, the Czech Republic shows an increase in house prices of +14.5% on an annual basis in the second quarter of 2021. The figure is significant, not only because it is 8.4% higher than the previous year, but above all, because it becomes the largest annual increase since the second half of 2008, a year that has not gone unnoticed in the real estate sector. The price hike is to be found in several factors: extremely low interest rates for mortgages, monetary easing, and massive state incentives in several countries must be considered as the main causes. In addition to the limited supply that failed to meet high demand, it is considered that other factors that increase the cost of housing are slow construction hampered by cumbersome approval processes and the increase in the cost of construction work due to the rise in raw material prices and higher wages recognized by workers.
Even if house prices on the Czech market remained unchanged for the rest of the year, they would still be significantly higher than a year ago, and the new Eurostat data suggest that prices are moving further away from affordability for most people living in the Czech Republic.
Within the country, the highest values are recorded in Prague, which in addition to representing 62% of the volume of the sale of apartments, is the most expensive market in the country with a huge gap compared to other regions. In the capital city prices are 125% higher than the average, and the “Prague Real Index” increased by 5.7%. This index represents the change in the average percentage of prices of apartments sold compared to the previous period.
For its part, the Czech National Bank is trying to combat this by raising interest rates by 0.75%, this attempt aims to reduce interest on mortgage loans. The Bank’s action surprised the Government, which argued that such a decision would only make loans more unsustainable. What is certain in the short term is the dizzying rise in house prices, on the other hand, what is uncertain are the consequences of the policies adopted.
Source: www.progetto.cz
