What does happen with real estate prices in Prague and why?
In the last six years, sales prices of new apartments in Prague have almost doubled. While in the first quarter of 2015 the average sales price was CZK 56.000 per square meter, in the end of 2020 it is CZK 110.000. As an example, in 2015 the average 70-meter apartment in the capital have been sold for around 3,9 million CZK while today it would cost 7,7 million CZK.
The main reason for the rise in prices is that there are not enough of new flats in Prague to satisfy the demand. According to the statistics of the largest Czech residential builder Central Group since 2015 there have been sold twice as many apartments as have been constructed.
5 main reasons why the prices of Prague flats do not fall:
1. Not enough of new flats. Due to the length, complexity and opacity of the permitting process, it takes up to 8 years to approve a residential project.
2. Global turmoil and uncertainty cause an increase in the purchase of real estate. The gradually growing upper class is trying to safely invest money in something tangible. In this case, real estate is traditionally one of the best choices.
3. The quality of housing today matters significantly comparing to a year ago. Now we spend much more time at home, hence the requirements for the housing has been changed and people started to search for more appropriate options that would fit their new life style.
4. Developers precede customers. Change layouts during construction? Individual selection of paving and sanitation or change of contract terms? Developers are happy to listen to customers and are as accommodating as possible. However, this does not apply to prices. With the huge demand the developer has no reason to provide individual discounts.
5. People who believed in a drop in prices are returning to the market. In March and April some speculated that prices would fall. Subsequently, they found that nothing dramatic was happening and prices continued to rise. If one finds a property that suits him, the price is in second place. It may happen that he will not come across a similar property for another 5 years. And in the long run (10 years plus) the value of his property will most likely be significantly higher than when it was acquired.
At the moment all mentioned above can be advantage for both – buyers and sellers. The first can invest their money in an asset that in long run would always grow in price and value. The second can still get very interesting money for their property if selling now.
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