According to experts, the real estate market is expecting further recovery. The reason is the improving economy and falling interest rates.
The increase in property prices affects most of Europe, a Czech National Bank analysis found. According to the Association for Real Estate Market Development, we can prepare for a further revival of the European real estate market this year, supported by economic stabilization and falling interest rates. The domestic real estate market should follow this trend, with demand for properties remaining strong.
An analysis by the Czech National Bank found that the European real estate market has been experiencing a resurgence in property price growth over the past year. In most of these countries, the cost of purchasing an apartment or a family house is in line with long-term average income. The exception is the Czech Republic, where property prices are significantly above average in relation to income, as claimed by the report.
Availability of Apartments
According to the current CG-Index, it now takes 15.5 annual salaries to purchase an average 70 square meter new apartment in Prague. This is approximately one annual salary more than half a year ago, and even five annual salaries more than ten years ago.
The head of the development company Central Group, Dušan Kunovský, sees an opportunity to slow down the price increase, for example, in faster approval of new projects.
"Accelerating permissions is absolutely necessary, but it is not the only necessary step. It is also necessary to accelerate and make spatial planning more flexible, so there is actually somewhere to build. For example, a change of the land-use plan was just approved in Žižkov, unblocking the construction of several thousand apartments. But it took over 16 years. And another necessary step is the alleviation of the incredible over-regulation in construction, which stifles and increases the cost of housing construction,"
Kunovsky stated this for LP-Life.
"Rough estimates show that we need to build approximately 50 to 60 thousand new apartments every year. But over the last ten years, we have built just over 30 thousand per year,"
wrote analyst of Česká spořitelna, David Navrátil, to the editorial team.
As the current document of our central bank describes, the peak of real estate prices occurred in most European countries at the end of 2021. However, due to high inflation, these costs have decreased. After the financial crisis, the accessibility of housing in Poland has increased the most among the V4 countries.
Rents are strengthening
The report further explores whether Europeans tend to live in their own homes or in rental accommodation. Analysts have found that the proportion of owner-occupied and rented housing on the old continent differs significantly depending on historical, economic and cultural factors. On average, approximately 70 percent of the population of the European Union owns property. However, the proportion of home ownership is higher in Eastern European countries. Conversely, rental accommodation is more frequent in Western European countries.
According to experts, we can expect interest in rentals to also increase in our country. The Association for Real Estate Market Development in its this year's document Trend Report assumes that this segment will be accompanied by "further increase in rents, especially due to limited supply of available housing, rising cost of ownership housing and high demand for a flexible way of living". Renting, however, may not only concern those who have deep pockets. It is a lifestyle that allows tenants to devote more to their hobbies.
"Tenants want to be able to move in with just a suitcase of clothes and find everything they need in the apartment. They are looking for a combination of home comfort with hotel-level services. In modern rental housing, therefore, bedding, home decorations or bathroom accessories are not missing. Such housing is transforming into a real service, which saves time and worries,"
LP-Life pointed out Elena Pisotchi from the company AFI Europe.
Revival of the real estate market
The future development of the property market in Europe will most likely be determined by a combination of macroeconomic factors, central bank policies, and the dynamics of property supply and demand.
"Attention will focus particularly on the interaction between the USA and China, which is going through a period of significant economic challenges. These include slowing growth, a real estate crisis, demographic pressures, and adaptation to changes in the global market,"
points out the report of the Czech National Bank.
The Association for Property Market Development argues that we can prepare for a revival of the European real estate market this year, supported by the stabilisation of the economy and declining interest rates. According to available analyses, average property prices in Europe could increase by approximately 4 percent by the end of the year, mainly due to the residential sector. The Czech real estate market should follow this trend, with the demand for properties remaining strong and leading to further price increases.
Despite the likelihood of interest rates falling, mortgages are still expected to remain - compared to the period before 2022 - relatively expensive. For this reason, households may continue to face higher repayments and reducing availability of home ownership, claims Trend Report. The future development of the real estate market will therefore depend not only on the policy of central banks and mortgage institutions, but also on regulatory measures in the field of construction and urban development.
Sources: author's article, own questioning, CNB, ARTN
