More Prospective House-Buyers Are Becoming Renters As Real Estate Prices Continue to Rise
For years, both rents and real estate prices have been rising quickly and significantly, with rents increasing at a slightly steeper rate. During the volatile first half of 2020, however, house prices seemed unaffected by the pandemic, whereas rents are seeing a declining trend, leading to a 50% year-on-year increase in prospective renters. Photo credit: ZM / Brno Daily.
Czech Rep., Aug 7 (BD) – With the second quarter of 2020 coming to a close, new data on the aftermath of the state of emergency has provided a clearer insight on the effect of the coronavirus on different areas of our economy and society. In the real estate market and property prices, that effect has been minimal, according to Hypoteční banka.
During the second quarter, the market prices of flats, family homes, and land in the Czech Republic continued to show a year-on-year increase, with the biggest increase in the price of flats (7.3%) and a slightly lower increase in family homes (6.5%), according to the HB Index.
Since 2007, house prices in the Czech Republic have increased by 70%, and rents by 80%, according to data from Eurostat. Since the pandemic hit, however, news outlet CT24 reports that real estate agencies and brokerage portals have noticed a fall in rents, mostly in Prague and Central Bohemia. Combined with an uncertain and possibly unfavourable financial situation, many prospective property buyers are now looking to rent, rather than getting burdened with a mortgage. According to CT24, there was a 50% year-on-year increase in prospective renters in the last quarter.
With rents falling by up to 20%, the increasing demand for rental properties seems understandable. Rents have nosedived in particular in locations near popular tourist spots, long dominated by short-term tenants, especially in Prague. CT24 gave the example of a 50m2 apartment in Prague with views of both Tyn Church and St. James Church, which was listed for CZK 20,000, including bills. At the beginning of the year, the rent would probably not have been less than CZK 25,000.
House prices, on the other hand, are unlikely to fall in the foreseeable future, again especially in Prague. According to analysts at Deloitte, developers would rather reduce supply than sell at a loss. And with ever-increasing demand, as well as a combination of slow building permits, rising prices of land, construction work and materials spiking costs, the point of breaking even and thus sale is also continuously rising.
It is not completely unsurprising, however, that apartment prices are continuing to rise despite the pandemic and related lockdown measures. During the last financial crisis in 2008, flat prices also saw no significant drop, according to Deloitte.