At the beginning of 2020 no one would have predicted such a 180-degree shift in the real estate market. In a state of emergency, speculations have emerged in the domestic market that demand for mortgages will weaken, and perhaps everyone expected real estate prices to fall. What do real estate agents predict about the market for the year 2021?
The development of real estate prices
Anyone who anticipated a fall in property prices during the second wave of the emergency was bitterly disappointed. Real estate prices in Prague on the contrary continued to rise, since a lot of owners postponed the selling of their property and instead switched to long term leases. This created a situation where there still is a lack of properties for sale.
What influenced the sales of real estate in 2020?
- There was an increase in long term leases, so rent prices decreased, mostly in Prague.
- A lot of firms have allowed work from home, so lots of employees don't need to move for example to Prague and can perform their work from anywhere. Therefore a lot more properties in bigger cities have become available for rent. Furthermore the need to live in large cities has dropped.
- A large amount of commercial spaces are completely empty. Offices are not being used, there are lots of spaces ready to be opened as gastronomy businesses and so on. Prices for meter square are dropping and one of the solutions at hand is a change from commercial to residential property.
- There have only been a few flats for 3,5mil CZK available this year. You will find a wide range of 1 bedroom, studio and 2 bedroom apartments on the market. But the demand for 3 bedroom apartments and larger is growing, because people require a home office, which wasn't as needed prior to the emergency state. Another fact is people spend much more time at home, which increases the demand for comfort.
- The rental price is also greatly affected by the suspension of tourism and the unnecessary service of short-term rentals.
- Apartments that are not adapted to the needs of a family or a couple are entering the market, because they were used for short term rentals for large groups of people.They are often luxuriously furnished, at a great address, but the reconstruction wasn't done with the needs of long term tenants in mind.
- The demand and therefore the prices for cottages, weekend houses and so on has increased and not only in areas surrounding Prague.
- The abolition of the acquisition tax certainly did not help stop the rise in property prices.
- And it seems that even the extension of the tax exemption from acquired real estate from 2021 from 5 to10 years did not change the attitude towards selling or purchasing properties, which was the goal.
- The criteria for obtaining a mortgage have been tightened and the banks have certainly been taking their time with the application process.
- There are virtual tours available so there is no need for making appointments to view properties.
An expert view of 2021
Everyone would certainly like to know what is going to happen next year, not only in real estate, but let's stay with our topic. What we think will happen:
- The growth of sales prices will continue to slow down, but will not stop.
- The imaginary scissors between nice properties in great locations and less attractive locations and blocks of flats will continue to open.
- Short term rentals aren't returning anytime soon, so rent prices will stay low in locations previously occupied by tourists.
- There will be no working foreigners in Prague so the demand for more expensive, larger rentals will stagnate and continue to fall.
- If you are planning a long term investment into real estate, or you are buying your own home, there isn't much to worry about, but if you are looking for short term investment opportunities, it is important to be more cautious than in the past.
Whether you are selling, buying or renting a property, contact us. Maybe this situation is a first for you. It could happen that you sell / buy your flat or house for an unreasonable price, or you are looking for tenants for too long. Our real estate experts will take care of your property in a professional manner and will ensure an adequate price.