The demand for real estate in all the Czech Republic is experiencing a high rate of growth. Because of this, prices for both rents and purchases are raising as well. According to KPMG analysts, the selling prices have increased by 18% in a period of two years.
When examining the details, it is possible to see that the selling prices are growing faster than the renting prices. This means that the ratio between the market valuation and the gross rental yield of properties is becoming higher. This value recently managed to become stabilized at approximately 5:1. Of course, as selling prices are expected to continue rising these yields will become lower.
These trends show a fundamental change in how the real estate market works in the Czech Republic. For example, before 2014 rents were higher than the market value of most properties. Going back even more, between the years 2008 and 2012, rents were able to completely wipe losses created by the fall in real estate prices back then.
Considering the aforementioned high rate of growth in apartment prices in the country, demand for their rental has increased as well. A consequence of this was that by December of last year there were only 6.300 housing units available for rental in Prague. This number is considerably lower than the 9.000 available two years ago.
Despite this increase in demand for housing rentals, a low amount of people lease their living space in relative terms when compared to other European cities. For example, 32% rent their homes in Prague, which is a big difference when compared to London’s 49% and Berlin’s 84%.
When comparing the increase in housing prices between the Czech Republic and the EU average, the country more than doubles the continental block, with growths of 8.7% and 4.2% in the last quarter of 2019 respectively.
This growth of 8.7% puts this country in the sixth place when comparing individual EU member states. This ranking is lead by Hungary with a 14% increase during the same period of time.
However, if the comparison is extended to the whole of 2019, the Czech Republic experienced the second-highest rise in property prices among EU members, being beaten only by Hungary. These trends are expected to continue, as the supply can’t cope with the demand, and housing projects are subject to long waits in their building permits.
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