Scarcity: Average new Prague flats selling for CZK 140,000/sqm

Robert McLean

#cee, #proptech, #development a #architecture

Residential developers in Prague aren’t just running out of consumers who can (or will) pay the crazy prices flats are now offered at. They’re also running out of flats to sell, according to Flat Zone, which monitors and analyzes residential prices. It found that as of the third quarter of 2021, the number of available units fell by 51% y-o-y to a mere 2,750. That’s an impressive collapse. Flat Zone project manager Vit Soural says that the last time there was a healthy supply of flats available (which means around 7,000) was in 2014. Since then, the figure has dropped 57% to decidedly unhealthy levels. One result of which is that prices were going ballistic even before the pandemic.

Prague flats

Source: Flat Zone

Today, the situation is getting out of hand. Since the end of QII 2021 alone, availability dropped by 600 units by 18%. Which is to say that 600 more flats were sold than were placed on the market.

Flat Zone’s system constantly scrapes data from the websites of real estate developers to track the asking prices for apartments that are on the market. Soural says that new units appearing on project sites are on offer for CZK 160,000 per square meter.

As recently as last year, the average Praguer was still horrified that the average apartment prices had quietly climbed above CZK 100,000. By the third quarter of this year, over 60% of all new apartments sold cost more than CZK 120,000 per square meter. In its Q3 analysis, FlatZone writes that most new flats now selling for CZK 140,000/sqm, the percentage of units that cost between CZK 110,000 and CZK 120,000 dropped from 20% to just 11.9%.

Prague flats

Source: Flat Zone

But while developers are quick to pin the blame for high prices on the slow pace of securing planning permits, there are other factors at work. Not the least of them, says Soural, is the growth of the Build to Rent (BTR) sector. “Investors are coming into the Czech market and they want to buy a lot of new properties,” says Soural. “It’s causing the prices to rise even more.” It’s not uncommon to see new units listing at CZK 160,000 per sqm. He claims that while BTR investors won’t be paying the full price if they buy an entire apartment building, the discount they achieve is unlikely to be a lot more than 10%. A recent Flat Zone report quotes BNP Paribas RE’s estimate that investors have acquired €100 million in existing apartment buildings and new projects.

The question following the Czech National Bank’s surprise 1.25% rate hike in early November is whether it will cause prices to stall. Quickly rising interest rates are certain to kill off a significant volume of demand for individual mortgage loans. But European investors continue to have access to cheap money. Will this allow them to continue paying ever-higher prices for Czech residential assets?

 

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