czech property news september

A taster of some Czech property news in September:

Erste: Czech Republic is safe real estate harbour

The bank group Erste in its survey of Central European real estate companies stated the Czech Republic along with other Central and Eastern European countries is still a safe place for property investments. In contradiction to countries of a former Soviet Union and Western European countries, the commercial property market in the region will slow down but not stop.

Interest in luxury apartments still growing

According to the Czech News Agency, interest in the luxurious apartment segment is still strong and growing. The real estate company Engel & Volkers announced a 21% increase of interest in the expensive flats segment. Also, the development company Satpo Development revealed that for the first eight months of this year they have recorded an increase of residential units sold in range of several tens of percents.

Crisis pushes down demand of new flats

The real estate crisis which has already reduced demand for overpriced prefab flats, is now affecting the market for some new flats. In order to boost stagnant sales, developers with inferior projects have started to offer discounts or financial bonuses to buy equipment. The companies offer discounts ranging from CZK 50,000 to CZK 150,000 on kitchen equipment, or a free parking space in a garage, worth up to CZK 300,000. Customers are more demanding and selective in what they will accept. They consider the price, quality, location, architectural concept and other such factors. Overpriced, low-quality projects of poor architecture design can be found in some less desirable locations, and the times when customers would buy almost anything are gone.

Mortgage market update

The first half of the year showed a 20% y-o-y decrease in total amount of total mortgage loans in the Czech Republic. After the record years 2006 and 2007 when people borrowed 100 billion CZK and then 140 billion CZK, a the expected decrease in mortgage volumes has taken hold. However this year’s 60 billion CZK loans show the actual demand for an own flat is still strong. Moreover thanks to the recent cut in interest rates the volume of mortgages is slowly increasing. All told, a total volume of 125billion CZK in mortgages is expected for this year.

Basic interest rates of central banks

Japan	0,75%
USA	2,00%
Czech Republic	3,50%
EU	4,25%
Slovakia	4,25%
UK	5,00%
Poland	6,00%
Hungary	8,50%

Spending decrease threatens panel houses

A decrease in spending budgeted for the support of high-rise apartment houses (paneláks) might cause the development of new social ghettos. Well-off people will be able to move out from there soon and lower income people will take their place, said Vít Vaníček, the head of the Union of Czech and Moravian Housing Cooperatives (SČMBD). A program for paneláks run by the State Fund for Housing Development (SFRB) will soon have no money left in its budget, according to fund director Jan Wagner. This year, the Czech government approved only Kč 1.5 billion for the program, which is about a third of last year’s amount.

Beroun: residential complex with over 600 flats

The development group Crestyl is readying for construction of a new residential complex called Berounske strane. The project will bring to the market around 621 flats and will have a total size of about 48,000m². The first phase should be finished in 2010. The number of inhabitants in Beroun increased in the last three years by 1,000 people and local municipality expect that in the following five years the total population should increase by another 5,000 people.

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Is the Czech property market like the UK back in 2003

The Czech property market has performed very well over the last couple of years.

There have been reports recently that this growth period is coming to an end.

My view is that yes property price growth is slowing after the heady growth of 2007, but that property price growth in the Czech Republic will still remain healthy over the next couple of years.

It reminds me a lot of the UK property market back in 2003, after a period of good growth every one said that it could not continue much longer and then was the time to get out.

What followed was a sustained period of excellent property price growth for around the next 3-4 years all over the country, making many people very rich in the process. Those who sold sold in 2003 missed out indeed.

The parrallels are similar today in the Czech Republic.

Price growth has been good and has slowed a little (relatively), but I believe there are still good fundamentals to the market.

Unemployment is still low, the economy continues to expand well (unlike in western Europe), prices are still affordable for many and interest rates on mortgages have come down again in the last 2 weeks, 100% LTV (and more) is still available around 5-5.5% interest rate.

Many Czech banks have reported that after the summer period demand for mortgages has increased yet again, and i see this trend continue over the coming years as household debt is still extremely small compared with western European levels.

Overall I still believe strongly in the fundamentals of the Czech property market (similarly in Poland too) and that the next few years will still provide investors with a liquid investment market with good solid growth, good rents and good mortgage finance.

I ponder the question a lot whether I should cash in my gains from the last few years in the Czech Republic, but I fear this would be foolish and I will continue to buy properties in the Czech Republic when I find ones at the right price in the right location.

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czech property news

Some recent Czech property news items:

More banks lower mortgage rates

ČSOB, Hypoteční banka, mBank and Raiffeisenbank in the last week lowered their mortgage interest rates by 0.3-0.4 percentage points, following a similar move last week by Komerční banka and Česká spořitelna. Bawag will reduce its rates today. For 20-year mortgages worth CZK 1.8 million, the cuts will reduce the monthly payment by CZK 300-500 a month.

Demand for mortgages on the rise

The country's leading mortgage provider, Hypoteční banka, reported loan volume of CZK 8 billion in July and August, an 11% increase year-on-year. Raiffeisen said that its own summer mortgage lending was up y/y by about 20%, and UniCredit reported 30% higher mortgage lending. Mortgage brokers and most banks confirm the rising demand for housing loans, as the year started out slowly but could end quite well.

Flat price not to decrease

According to the real estate company RE/MAX a reduction in flat prices is not expected within the next few months. As the economic situation is stabilised and the mortgage rates are lower once again, there is no reason for a slump.

Regulated flat rents in Prague could double

Regulated rents in Prague could increase on average by almost 46% next year. According to the Prague municipals it is expected that the rents in the higher standard flats will rise by 11 – 30 CZK/m² and the rents in the lower standard flats by 16 – 30 CZK/m². The rents for the flats owned by the city will then on average increase to 48 – 95 CZK/m².

CSO reports 25% y-o-y increase of flat prices

Average flat prices rose by 25.4% year-on-year in the second quarter of 2008. Prague prices grew more slowly at 19%, while the increase in some regions topped 31%, the Czech Statistical Office said. Prague inhabitants who want to buy a flat must prepare on average CZK8,500 more for one square meter than one year ago.

HSBC to enter Czech mortgage market

British bank HSBC plans to enter the Czech mortgage market next year, providing housing loans to individuals. This new product should be part of the expansion of HSBC on the local banking market. Currently more than 15 financial institutions operate on the Czech mortgage market.

RPG RE to invest CZK 17bn in reconstruction of flats

RPG Real Estate will spend CZK 17 billion on the reconstruction of more than 44,000 flats located in the northern Moravian towns of Ostrava, Orlová, Havířov, Karviná and Opava. The decision is opposed by a majority of the tenants who prefer to buy the flats and finance the reconstruction on their own.

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Czech mortgage rates

After last week's reduction in the Czech base rate back down to 3.5% now could be a good time to get a mortgage in the Czech Republic at a good fixed rate.

My view is that not all the banks will pass this rate reduction on to their mortgage products, as it is widely expected that at some stage in the not too distant future rates will increase again as there is still inflation present in the economy.

Typical rates for foreigners before the reduction were around 5 - 5.5%.

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