The end of the period of austerity signals a revival of the Czech real estate market in 2023, indicating a return to normal after a sharp decline in the second half of 2022. Sales of both older and new apartments have grown significantly. New builds almost doubled, while older apartments saw a 49% increase. Experts from the Czech Banking Association point out that the high year-on-year figures are due to a rebound from extremely low activity in the previous period.

The growth of the real estate market was supported by the gradual recovery of the mortgage market last year. The relaxation of rules and a slight decline in real estate prices and mortgage rates contributed to a return to the level of activity seen at the end of 2020. The slump in demand in 2022 caused a 7% drop in the prices of older apartments, while in the last quarter of 2023, prices fell by only 4.4%.

Prices of new buildings across the country fell by only 0.1% in 2023. Developers kept prices up with incentives such as free parking spaces or kitchen units, as well as subsidized mortgages. Although the decline in prices slightly narrowed the gap between prices and household incomes, Czechia remains among the countries with the worst housing affordability.

The housing affordability index shows that the unaffordability of mortgage-financed housing has increased by 112% since March 2020. Prague and the Ústí nad Labem Region are the most affected, with affordability deteriorating by 71% and 144.8%, respectively. Although the decline in mortgage rates in recent weeks has gradually improved affordability, banks are concerned about a sharp drop in rates, which could trigger mass refinancing of loans.

Banks began lowering interest rates at the beginning of the year following a decision by the Czech National Bank's board. According to experts, this development should contribute to a gradual improvement in housing affordability. However, banks are proceeding cautiously to avoid the risk of rapid and widespread refinancing of existing mortgages.

Source:

seznamzpravy.cz – End of austerity in Czechia
seznamzpravy.cz – Housing
affordability index seznamzpravy.cz – Mortgages are starting to become cheaper