Falling demand, a stagnant market, and a slight correction in sold property prices—these are the key trends of the Prague residential real estate market in recent months and the findings of the analysis prepared by Svoboda & Williams. The real estate agency's Market Report will now be published quarterly, beginning with this tenth edition.
After years of growth, the real estate business has been stagnant this year. While at the beginning of the summer the year-on-year growth of property prices in the segment that Svoboda & Williams has been monitoring for a long time stood at almost 10% for new builds and 6.6% for resales, the half-year comparison shows a significant downturn in the growth curve. "The price growth over the last six months has been below 1%. The most recent data for the last three months even indicates a 3% drop in prices," says Prokop Svoboda, owner of Svoboda & Williams.
Svoboda & Williams' Market Report will now be published four times a year, staring in October 2022. "We want to provide a more up-to-date service for our clients, and so we're adding quarterly reports to our traditional semi-annual analysis. We will be processing data from the previous two quarters and compare real estate market developments not on a year-on-year basis, but in two consecutive semi-annual periods," explains Svoboda.
As of the third quarter of 2022, clients of Svoboda & Williams paid on average CZK 158,036 per square meter for new builds and CZK 143,574 per square meter for resales. While in Prague 1 the average price per square meters reached CZK 211,583, in Prague 10 a premium property can be purchased for an average of CZK 137,689 per square meter. "One of the main trends of the last quarter is that buyers are demanding smaller units. Buyers would rather pay extra for a more expensive one-bedroom apartment than buy a larger two-bedroom apartment," says Kryštof Kušiak, analyst at Svoboda & Williams.
Svoboda & Williams' real estate agents are currently seeing more of an interest in resale properties, which account for 75% of transactions completed in the third quarter. "The downturn in the market and the significant decline in inquiries are testing the fundamental value of the offered properties. Although sales of new builds are now stagnant, clients continue to be interested in high-quality, carefully constructed projects in attractive locations. A good example is Šlikova 16, a converted apartment building in Břevnov,“ states Prokop Svoboda.
Rental housing has seen significant growth this year. The average rent in the monitored segment increased by 17% to reach CZK 39, 645 per month in the third quarter. Not only did this offset the pandemic slump, but it also surpassed average prices before the pandemic by 16%. "This increase in price isn't just influenced by the influx of refugees from Ukraine, but also by the fact that more and more Czechs are turning to rental housing," says David Šimeček, head of residential rentals. In his words, with rising prices, the profiles of interested clients are also changing. For instance, one-bedroom apartments are no longer only popular among individuals or couples. "More and more owners who want to sell their properties now prefer to rent them out temporarily,” goes on Šimeček, adding that he expects the stock of apartments to increase in this segment.
How the Svoboda & Williams Market Report Is Created
The analyses in the Market Report are based on sales and rental transaction data generated by the activities of the Svoboda & Williams real estate agency. These figures are supplemented by data on property sales obtained from the Cadastre of Real Estate with similar parameters to the monitored sample. The Market Report works exclusively with data based on achieved prices, additionally taking into account the price of parking and the proportion of the exterior. This methodology uses a specially developed algorithm to recalculate the exterior area that progressively reduces this area and takes in to account the ratio of the interior to the exterior.
Another useful tool for a more accurate interpretation of the rental market is the Rental Price Index by S&W + VŠE, an analytical tool developed by Svoboda & Williams in cooperation with the Faculty of Informatics of the University of Economics in Prague. The source of the data for this index are the actually achieved rents for apartments offered by Svoboda & Williams in order to illustrate the impact of the pause in tourism on rental prices in Prague.
