The period of stagnation and waiting on the Prague residential market is over. Along with the spring came a revival in the Prague housing market. The demand is rising, and interest in buying and renting is also growing, according to the latest Knight Frank report.
Key findings:
- The Prague apartment market is waking up. After a long stagnation, we are seeing a recovery in sales.
- High-quality and premium properties are holding their price, but we are observing significant differences in the price of new and older apartments.
- Demands for quality are increasing. Buyers are increasingly demanding a higher standard of furnishings and additional services.
- Difficult access to mortgages, high property prices, urbanisation and migration are further strengthening the interest in institutional rental housing.
The residential real estate market has experienced turbulent developments over the last three years. The boom in sales and mortgages during the pandemic was replaced by a market freeze last year. This stemmed from concerns about the situation in Europe, a significant increase in mortgage rates and the overall economic situation, which was negatively affected by high inflation. The period when even older flats were sold at a price comparable to new ones, when even poor-quality properties were disappearing from the market quickly and when buyers faced pressure to make decisions promptly and often to increase the selling price, is gone. The tense situation in Europe and the unfavourable economic situation last year have caused caution and dampened interest. However, this has been changing recently, according to an analysis by real estate consultancy Knight Frank, which maps the development of the Prague housing market in the last quarter of last year and the first quarter of this year.
"The period of stagnation and waiting is over. The Prague residential market has recovered with spring," says Kateřina Poláková, Head of Residential Property at Knight Frank, commenting on the current changes in the Prague residential market. "The demands of buyers are also changing. People are more focused than ever on the quality of housing and have higher demands on its standard and additional services. I think there is a levelling out of the relationship between the price and quality of the property, which contrasts with the pandemic years when basically everything was selling quickly and expensively thanks to low mortgage rates. People are more demanding. Buyers with financial resources are more likely to invest in premium properties.
Others who can't or don't want to buy property are again opting for rentals in BTR projects. These institutional rentals meet their requirements for quality and high standard of living," adds Poláková.
New buildings - end of stagnation, sales recovery
Supply on the market grew slowly over the past year, while demand remains weaker due to higher interest rates. Prices have barely moved over the last six months, and the expected discounting of new flats has not taken place. The average offer price for an apartment was CZK 9.7 million. The average price for a new flat was CZK 151,970 (€410,000) per sqm, while a sqm was offered for CZK 151,970 (€6,400). Many current buyers are financing their housing from their own sources, but the number of sales based on incentives from development companies to take out subsidised or guaranteed mortgages is also increasing. Other incentives include, for example, free garage parking, a cellar, superior equipment, air conditioning and more.
Secondary market - price correction, location plays a major role
Over the last six months, the secondary market has experienced a slight decline in prices by an average of 2.2%. As with new buildings, there is a large price dispersion in older flats. This is influenced by the location, type and quality of the property. The condition of a particular unit also plays an important role. In the outskirts of Prague, we have seen a drop in sales prices of more than 10%. The average offer price for an apartment was around CZK 8.5 million ( €359,000), with sellers asking an average of CZK 119,470 (€5,000) per sqm. There was a visible drop in the supply of older flats by 14.2%, which was probably caused by owners' concerns about lower prices and the withdrawal of these flats from the sale.
Premium segment - prices are rising
In the premium segment, there was a slight increase in selling prices and a widening of the offer. The prices of newly sold apartments rose by 1.9% over the last six months to CZK 202,430 per sqm ( 8,500 per sqm). Buyers continue to regard new premium properties as a stable investment. Overall, the most expensive flats per square metre are 5+kk/5+1, while the most expensive for sold units are 4+kk/4+1.
The demand for small and high-quality flats is also growing. Buyers have increasingly higher demands on the standard of flats' equipment and additional services offered in the buildings. The resulting product meets the required criteria and at the same time is below the maximum achievable purchase price. The most offered and demanded 1 + kk and 2 + kk apartments, even in investment projects, were priced close to the premium segment and exceeded the limit of CZK 200,000/m 2 ( € 8,435).
"For this type of product, it will be interesting to follow its further development. Increasingly, projects are appearing on the market that offers only smaller investment units, for example in apartment buildings after complete reconstruction. Whether their premium price has a ceiling and corresponds to the quality, we will see in the future. Buying power and the willingness to accept the selling price will influence the preparation of the offer in the coming years," added Poláková.
