“The average transaction price of new apartments in the Czech Republic increased by 8.6% in 2019 compared to the previous period. Although housing prices did not rise as sharply as in the past three years, Prague, for example, remains one of the most expensive Central European cities included in the study, with 3,395 EUR/sqm,” says Miroslav Linhart, Partner in the Real Estate Advisory department of Deloitte.

Covid-19 and the real estate market

The crisis caused by the pandemic has slowed the real estate market in Europe. However, the situation varies market-by-market. In France, for example, activity at 90% of construction sites was temporarily suspended in connection with the quarantine. On the other hand, the state of emergency in the Czech Republic, except for some sanitary measures, has not yet significantly affected the construction industry.

“The quarantine has significantly affected the rental market. Crowds of tourists have disappeared from major European cities led by Prague and Rome, which also entails declining demand for short-term apartment rentals through accommodation apps. Thousands of vacant apartments in attractive locations have suddenly appeared on the market, with their owners trying to mitigate the drop in income by long-term rentals,” adds Petr Hána, Senior Manager in the Real Estate Advisory department of Deloitte.

Deloitte the real estate experts estimate that apartment prices in the Czech Republic will more or less stagnate in 2020. Growth is once again anticipated in the years to come. However, further developments will depend on how the pandemic evolves. For the time being, countries that already had a good basis for further market development can enjoy a positive outlook. These include the Czech Republic, Slovakia, Belgium, the Netherlands, Norway and Israel.

“The crisis gives the real estate market a new perspective on how Europeans live and has the potential to change this, for example by greater use of home office. At the same time, it can also bring about changes to the way the real estate market operates, making it more online-oriented,” adds Igor Zsebik, Deloitte Analyst.

In absolute terms, the Czech Republic is among the cheaper markets

Although a new dwelling in the Czech Republic is the least affordable relative to salaries, nominal prices have not yet reached the level of Western countries. Luxembourg, which appeared in the index for the first time, became the most expensive one, with the average transaction price exceeding 7,000 EUR/sqm. As for cities, Paris, where the price reaches almost 13,000 EUR/sqm, remains almost four times more expensive than Prague. The prices in German and Belgian cities also tend to be high.

In the Czech Republic, just over 36,000 apartments were completed last year, which is more than three new apartments per thousand inhabitants. Most new apartments were finished in France (449.4 thousand), but the most new apartments per thousand inhabitants can be seen in Luxembourg (11.9). France also dominates the list of initiated apartments (over 410 thousand). Bulgaria, on the other hand, had the smallest number of initiated apartments (only 1,000). In the Czech Republic, it was over 38 thousand new apartments, which is 5 thousand more than in 2018. 

Rental prices also vary greatly in Europe. The most expensive monthly rent is in the centre of Luxembourg (30.7 EUR/sqm), followed by Paris (28.3 EUR/sqm) and London (27 EUR/sqm). The cheapest rent is available in Sarajevo (4.1 EUR/sqm). The rental price for a square metre in Prague is 12.3 EUR on average. Rental in Brno and Ostrava amounts to 9.6 EUR/sqm and 6.4 EUR/sqm, respectively. 

Analysts also focused on average mortgage interest rates. The average rate in the Czech Republic was around 2.7%, which is rather high in the European context. The lowest rates were in Portugal (1.1%), the highest in Hungary (4.6%). In 2019, the Czech mortgage market adapted to tighter regulation by the Czech National Bank, recording the worst results in the past five years. The volume of mortgages provided in the Czech Republic decreased by 16.9% to CZK 181.6 billion.

This year, Deloitte Property Index 2020 compares the record-high 23 European countries. In addition to the Czech Republic, these countries include Belgium, Bosnia and Herzegovina, Bulgaria, Denmark, France, Croatia, Latvia, Luxembourg, Ireland, Italy, Israel, Hungary, Germany, the Netherlands, Norway, Poland, Portugal, Austria, Slovakia, Serbia, Spain and the United Kingdom.

See the complete Deloitte Property Index 2020 here.