Prague construction offices issued a grand total of 48 flats in new apartment building permits during April. If you do the math, that’s not going to help much in a city that needs 10,000 new flats completed annually.
Central Group’s numbers estimate that there are around 140,000 flats in Prague’s development pipeline, but on average just 5,000 per year receive permitting.
Nationwide, things aren’t a whole lot better for the construction sector. Just 6,387 permits were issued in April, a 10.9% decline. And despite huge demand, the number of construction starts on apartment projects fell by 24.6%. “It’s a continuation of the long-term trend in which construction is paralyzed because of the long approval processes,” says Michaela Tomášková, CEO of the residential developer Central Group.
“This results in insufficient construction, in a huge overhang of demand over supply and the rise in prices for new flats,” she claims. “If the permitting happened more quickly and in greater numbers, the prices of new flats could fall by 15%.” That’s a bold claim, since Prague’s population is growing roughly twice as quickly as its housing stock. High interest rates have choked off the crazy levels of demand we were seeing a couple of years ago. Despite this, prices are only falling for older, lower quality flats.
For the time being at least, developers are in no rush to sell their new units, so prices are currently in a holding pattern. This could change if interest rates were to drop, something that doesn’t look likely in the immediate future. On the other hand, the Czech National Bank could spark demand by loosening strict borrowing restrictions this summer. That’s one more reason developers are unlikely to drop their prices.
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