Real estate market 2021. What awaits us?

To begin with, the situation concerning the real estate market has become very ambiguous. If earlier it was appropriate to talk about the constant growth of both demand and supply, now everything has become much more complicated. The situation with banks, developers, secondary housing is very different from what we are used to. Let’s take a look at each of these elements separately.

Let us start with the rental market. At the moment, apartment rental prices naturally have dropped quite a bit, as a consequence of the coronavirus epidemic. A large number of apartments that were rented out for short-term rent are now being rented out for long-term rent, without any hope of returning their owners to the previous business model in the near future. Plus, there is a large reduction in the flow of foreign employees, which is a consequence of the closure of many offices of large companies and employee cuts.

The local population is also experiencing a decline in income as a natural consequence of the decline in business. More than 700 thousand residents – individual entrepreneurs are currently registered in Prague (many work in companies) and more than 500 thousand work as individual entrepreneurs and conduct private activities (of which more than 200 thousand are companies). Let me remind you that there are only 1.3 million inhabitants in Prague.

Number of inhabitants according to trade licenses and entrepreneurs

Due to the abovementioned factors , renting out properties has become very problematic. Even with a 20% reduction in rental prices compared to 2019 prices. In addition, the number of insolvent employers and various types of swindlers has significantly increased. In this situation, it is very important to consciously and carefully choose those to whom the property is rented.

Banks

According to many banks, and most importantly the Central Bank, 2020 became a record year in terms of the amount of mortgages issued (207 billion CZK). At the same time, the previous record was in 2018 (about 187 billion CZK). Banks predict that 2021 will be no worse than the previous year.

Of course, if a severe economic downturn awaits us as a result of recent events, property prices may fall by 8-10%. It is also appropriate to remind that according to the Central Bank, real estate prices are exaggerated by about 15-25%.

Prestige Group company logo, Prague in the background

Purchase

With the purchase of apartments, everything is completely different than with the sale. Despite the aforementioned factors, as well as the difficulties in renting real estate, the interest in buying real estate has not dropped. There were only a few interesting changes. A positive role in sales was played by the abolition of the acquisition tax (4%), as well as a decrease in mortgage rates. In my opinion, two other factors also played a major role in this great interest. The first of which is the need for cash, financial difficulties, and other problems of real estate owners, which leads to the willingness to sell real estate at a more adequate cost.

The second factor is the prices of the developers. They have not changed, and in some cases even increased, as if nothing had happened in the economy over the past year. But this is easy to explain, since developers are forced to pay off loans, promised income to investors, and cover the costs of construction. The only question is how long they will be able to maintain this price level and what consequences this will lead to in the companies themselves. It is also important that all of this depends on how long the story with the coronavirus epidemic will last.

One way or another, there is an opportunity to buy secondary housing, for example, 1-3 years old constructions, which will be more profitable financially. Of course, the preference and desire of the buyer himself is very important here.

Personal opinion

My personal opinion boils down to the fact that buying a home has always been and will be the most stable investment, because the world is not rubber, the population is growing rapidly, and the square meters in apartments are becoming less and less available. It is also important to be clear about your goal. It is not difficult to find profitable and interesting options on the market, and prices in 2021 will not differ from the previous year. And if you decide to sell your home, then there is no more suitable time for this, because the interest in purchasing your own home is growing rapidly every day.

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Vladislav Glinskij

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17 December 2021

Estimated reading time: 2 minutes, 45 seconds

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