Development News

téma / topic
REZIDENČNÍ TRH / RESIDENTIAL MARKET
seasonal fluctuation. Sales in the April–June period increased
on a year-on-year basis by 13%.
“The outlook to the end of this year will be even more positive
than last year. Nevertheless, let’s leave conclusions for
the autumn when we are clear about the development of
mortgage interest rates that remain the most important and
significant factors relating to the positive demand for new
housing,” Marcel Soural, managing director at Trigema, said.
What is pleasing and encouraging for demand is the fact
that prices of apartments do not basically increase, at least
not in Prague (we do not have reliable information or data
about other markets). Average prices increased on a year-onyear
basis by 1.2%, to CZK 61,805 per sq m, in the second
quarter they fell in comparison with the first at 2.3%. After
clearing data from those extremely expensive and extremely
cheap apartments, the average price remained virtually unchanged
(+ 0.1 %). This phenomenon cannot be unambiguously
associated with the sale of ‘slow sellers’ or dead stock.
On the one hand there are not that many of them in order to
influence average prices and on the other hand the number
of vacant apartments is decreasing. There are about 700 vacant
apartments from those completed two or more years ago
and in total there are 1,600 completed vacant apartments
available in Prague. This represents a significant drop compared
with the situation two years ago.
Demand for new housing is supported by the trend of constantly
falling mortgage rates. The indicator of average interest
rates, the Hypoindex, fell in the first half of this year from
a level of 2.4% to 2.1%.
CHINA IMPEDES INFLATION
In the context of strong economic growth, a reduced unemployment
rate and increase of citizens’ disposable income,
the ongoing reduction of interest rates, not only with regards
to mortgages, is an entirely unusual phenomenon. In a similar
situation economists usually pronounced inflation, or at
least expect inflation and therefore an increased cost of
loans. After the central banks of the strongest economic
global formations (the American Fed and the European Central
Bank) bought uncovered bonds and ‘printed’ more and
more money, the arrival of inflation (relatively massive inflation)
only seemed a matter of time. The economist Markéta
Šichtařová, director at the consultancy company Next Finance,
indicates why it isn’t so: “Europe is blessed in disguise.
It seems that it won’t be treated with such a period of longer
lasting consumer confidence as it is already slowing down
even before having a chance to start a new period of economic
growth. Therefore, basic conditions for a burst of inflation
fade. In parallel, falling commodity prices rather tend
to secure deflation and not inflationary pressure which will
drive the ČNB and the ECB crazy. What this means for consumers
in the Czech Republic and in Slovakia is that the period
of very low interest rates is being prolonged. One cannot,
for instance, speculate about any increase in the cost of
mortgages during the year.”
Let us add this, just to have an idea about the globalisation
of the nowadays world in which most local economist had not
believed before the financial crises broke out in 2008, that the
deflation trend is mainly caused by China, whose economy
started falling, their demands for goods and raw materials, including
crude oil, slowed, share prices are falling and free capital,
having other safe harbours, anchor in investment gold
that has no influence on interest rates and loans.
As for Prague, it would appear to be record breaking sales
of apartments being over 7,000 for the whole of this year. But
this will be decided by the second half of the year.
In the first, approximately two thirds of sold apartments in
Prague were in sizes ranging from 57 to 82 sq m and their average
price was between CZK 3.4 and 5.2 million. About 16% of the
smallest (up to 40 sq m) and the largest (over 107 sq m) apartments
had the same share on their sales. Trigema averaged out
the results. Based on their analysis from the second quarter of
this year, the size of sold apartments reduced, in comparison
with the first three months of this year, by 1.5 sq m and their price
on average by CZK 1,820 per sq m. The most frequently sold
apartments still have the layout of bedsit + kitchenette and
two bedroom apartments, which prove the trend previously
indicated by Trigema: that is that the drop in apartment prices
is only optical as apartments are also getting smaller. A clients’
trend not to buy the cheapest apartment, that developers are accommodating,
also continues. As for the offer of vacant apartments,
there were 73% in the central price span of CZK 40,000
to 70,000 per sq m in the first half of the year.
BRNO IS A SHIP OF GOLD
The company, Trikaya, monitors the residential market in
Brno, which might not be the largest outside the capital but
has great dynamics and corresponds with the development
of the city as the university and science centre of Moravia.
Trikaya state that 544 apartments, that is one quarter more
than the same period last year, were sold in the first half of
this year. The average price of newly offered apartments in
40 development projects is CZK 56,500 per sq m, being 10%
more than a year ago. “There are three reasons behind such
a significant price increase. The first is a decrease in the offering
of the cheapest apartments on the city’s outskirts. The
number of luxury apartments with above standard prices, on
the other hand, increased so the average price is going up.
And there is also the third factor that has an influence on the
market, this being the gradual price increase pulled by a high
demand for new housing,” Trikaya explains. “People’s demand
for new housing is high, supply is reducing and prices
are therefore increasing.” Director of the company, Alexej
Veselý, points out though that the Brno market is relatively
small and whatever fluctuation, for instance a decrease of
one hundred cheap apartments on the city’s outskirts, will
stir up average values considerably. “We have been registering
a gradual and permanent increase in apartment prices for
some time,” A. Veselý says. “Prices, amongst others, reflect
problems that were caused to investors due to the non-realisation
of the outline plan update and problems with permitting
new constructions. The ten percent price increase
applies to the whole market. If we wanted to clear the number
of the cheapest and most expensive apartments that
have the biggest influence on the average, the realistic price
increase is less than half, that is up to 5%.“
JAN FERENC
8
dn 8–9/2015