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Market Report H1 2022: The Prague Residential Market Is Slowing Down, but Offers Many Opportunities

140 days ago

According to Svoboda & Williams’ analysis, the first half of 2022 was marked by two key trends: property inquiries declined while real estate prices in the segment long monitored by Svoboda & Williams have continued to rise. The ninth edition of the Market Report summarizes the developments in the first half of this year.

The prices of the monitored premium properties in Prague’s residential market continue to rise. While the increase in new builds hovered just below the double-digit threshold (year-on-year growth of 9.8%), the year-on-year increase in resales was more moderate (6.6%). In the first half of 2022, clients of Svoboda & Williams paid an average of CZK 155,014 per sq. m. for new builds and CZK 141,970 per sq. m. for resales. In Prague 1, the average price per sq. m. went up to CZK 193,550, whereas in Prague a premium property could be purchased for an average of CZK 127,851/sq. m.

Rental housing recorded a significant increase in prices in the first half of the year. Rents in the monitored section went up by 14% to CZK 34,450 per month, which not only compensated for the drop experienced during the pandemic, but also exceeded average pre-pandemic prices by 5.2%. Most of the properties were rented by foreigners, who accounted for up to 69% of the tenants in the highest segment with rents of over CZK 55,000/month.

The nervousness felt in global markets due to the war in Ukraine and rising inflation is reflected in the Prague premium residential market. “Although the volume of the transactions we completed in the first half of the year has remained more or less stable, the current decrease in inquiries indicates that the market is slowing down,“ states Prokop Svoboda, Managing Partner of Svoboda & Williams.

Svoboda expects the Prague residential market in particular to experience stagnation or even a slight correction, which would offer investors many opportunities. “In fact, temporary slowdowns actually have a positive effect on the stock of housing, and interesting properties have been appearing in the market in recent months as part of this phase,“ he says.

He also thinks that the current development will speed up the Czech economy’s transfer to the euro. “Companies are already looking for funding in euros and I wouldn’t be surprised if residential developers start publishing their price lists in the common European currency next year and then convert them into crowns depending on the relevant exchange rate,“ continues Svoboda, adding that lease agreements have long been drawn up in euros in the office market.

“I believe that the current situation can also lead to higher demand for more energy-efficient, environmentally friendly, and higher quality projects that guarantee a lasting value in a devaluing, inflationary financial environment. These are the types of properties that we are looking for in the real estate market and as a society,” concludes Prokop Svoboda.

How Svoboda & Williams’ Market Report Is Created

The analyses contained in the Market Report are based on data on sales and rental transactions, generated by the activities of the Svoboda & Williams real estate agency. Supplemented by the facts and figures on property sales from the Cadastre of Real Estate that correspond to the parameters of the monitored sample, the Market Report relies exclusively on data based on achieved prices, which take into account the price for parking and a proportion of the exterior. To recalculate the exterior area, this methodology uses a specially developed algorithm that progressively reduces the exterior area while taking into account its ratio to the interior area.

Another useful tool for an even more precise interpretation of the development of the rental market is the analytical Rental Price Index by S&W + VŠE, which Svoboda & Williams developed in cooperation with the Faculty of informatics and Statistics of the University of Economics in Prague. The source of the data for this index are actual rental prices for the apartments listed by Svoboda & Williams. It therefore offers a good illustration of the impact that the cessation of tourism had on rents in Prague.

Svoboda & Williams Market Report | H1 2022 (download pdf)

Read previously published Market Reports. 

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