Has JRD adjusted to the new conditions on the residential market?
We have four projects that are currently running. In some cases, we needed to provide some incentives to customers. But I don’t want to make it sound to dramatic because we’re seeing something of a revival in the market. People have adjusted to the fact that money now costs money; that it’s more expensive to get a loan and that energy prices have gone up. But the need to buy a place to live is persistent. Last year was a bit of a shock, but this is normal after something like the Ukraine crisis. We needed to adjust our pricing expectations slightly, but it’s not a catastrophe. It was just too good to be true before and now the market has become more healthy. I think society is adjusting to the new normal and it will get a bit better. And there is still a lot of capital around and people still want to invest into housing.
But one of our long-term goals is to increase our share in the rental housing segment. That’s why we’ve established a separate division called JRD Invest, which will keep a portion of the apartments from our portfolio and make them available for rent to all those interested in healthy and sustainable living.
People got used to cheap mortgages, but so did companies. Developers got used to being able to borrow money at almost no cost. That’s gone now.
I remember my first mortgage. Though it cost 6%, I didn’t think it was something horrific. JRD has grown a lot over the last 20 years, but our business was never built on cheap financing. We’ve typically worked with private investors with whom we enter into joint ventures. They’re looking for higher returns than a bank. Of course, bank financing is more expensive.
You’re working on a project in Kamyk. What’s different about demand for apartments outside Prague?
For the time being, there’s a price advantage. You can get a 4-kk outside Prague for the price of 3-kk in the city, so you can put your whole family there and grow. What’s important these days is the number of rooms and the way the design is done – not just the size. This creates an opportunity for the developer to maximize the price per square meter, if the design is right. It’s a trend you see in other countries as well.
In other words, Czech clients want more rooms rather than bigger rooms?
I think the Czech Republic has been spoiled. We got used to very spacious flats. I live in a development that was designed 15 years ago, with four rooms and 125 sqm. Today, it would have around 95 sqm and it would be considered large. But that’s a general trend of urbanism. If you look at other cities, people live in much smaller spaces and they’re used to it.
I’ve seen studies suggesting that number of square meters per person in Prague is growing. In other words, the number of people in one flat may be falling.
Absolutely, that’s about demography. According to our research, there used to be 2.4 people per flat, now it’s 2.0. That sounds like a little thing, but it’s not because it creates greater demand per household. Then there’s all the deferred demand because of slow planning. It all adds up, it’s cumulative, so, we’re going to continue to see demand for apartments.
Is that how you explain the fact that prices for new apartments aren’t falling – just stagnating?
Yes it’s part of it. Also, you have construction costs which went through the roof in past years, while inflation isn’t helping either with labor costs. There’s no room for the price to go down. It’s not a matter of developers moving forward with smaller margins. You either build or you don’t build.
And it is fair to add that we expect a gradual recovery in the real estate market demand during this year. Therefore there will be certain rise in prices again in the near future – and we’re already witnessing it in our selected projects. The current situation creates the best opportunity for buying real estate this year. In the coming years, prices will gradually rise again, and discounts will not be expected.
But is it fair to say JRD’s building at a slower pace right now?
It’s the result of a slowdown in the planning process in some projects. Overall, we’re slower now, but it’s only because we don’t have the permits in place.
Maybe that’s a good thing, given current conditions?
No, I wish we could start. We believe in the success of our projects. We’re working on some second-home apartments built out of timber in the Šumava mountains. They’re for relaxation and investment. We’ll start regardless of the situation because the project will be unique. There are many wealthy people here who want to invest — and real estate is still the best investment.
You began as director of the land division, but now that’s been combined with the development division, which you’re in charge of as well.
The idea was always that I would cooperate with the development division because of my experience with office development. It became clear that there are obvious synergies between the divisions and we will work better together. So, we created a common management team and one division which is from now on called JRD Real Estate.
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