HOW WILL THE WAR IN UKRAINE INFLUENCE THE REAL ESTATE MARKET?

In the previous years the real estate market saw demand significantly exceeding supply, which resulted in a price hike. The situation became more complicated due to the Covid-19 pandemic, which brought tourism and the related short-term rental business to a halt overnight. Nowadays, properties are under more pressure as a result of the war in Ukraine, which is also combined with increasing inflation and high interest rates. How will these aspects influence property prices and rentals?

What kind of development on the real estate market can be expected?

Because of the combination of a large number of factors, we are in a relatively unique situation, which makes it difficult to predict how the real estate market will respond to them.

The main stimulus for the development of prices will continue to be the demand for properties.

It can be assumed that due to developers making new flats available slowly, which is caused by the generally lengthy process of development projects preparation, we will continue to see demand exceeding supply.

Furthermore, the increasing speed of inflation suggests that people will continue trying to find ways to protect their money and keep its value over the inflation rate. Properties have always been quite conservative and we could say safe investments that have been very popular with the Czechs.

It is also necessary to consider the fact that the influx of Ukrainian refugees, who come from all social classes (i.e. also from the upper ones), will increase the demand for properties even more, putting more pressure on their prices.

On the other hand, the high demand for properties might be cooled down by the increasing cost of money caused by the rising mortgage interest rates.

The combination of these factors supports the assumption that in the nearest future, property prices will not stagnate or drop. Rather, they will continue growing although not at such a fast pace as previously.

What kind of development can be expected on the rental housing market?

After the rental housing market was paralysed by the Covid-19 pandemic, a number of properties appeared on the market that had previously been used for short-term rental. That resulted in a temporary increase in the supply of properties and decrease in offer prices. However, the market recovered during last year and the prices of rental housing gradually returned to the pre-pandemic levels.

Since the war in Ukraine broke out and the refugees began to come to the Czech Republic, demand for rental housing has largely increased. There is demand for cheap rental housing as well as for premium property rentals. The question also arises of whether the government will support the housing of the Ukrainian refugees in a certain way, such as subsidising rental prices. That would significantly influence the market and cause further increase in demand.

The rental housing market is also beginning to be influenced by “expats” who, with the pandemic subsiding, are returning to cities and quality housing is usually included in their contracts.

Because the number of quality flats and rental offers is limited, the demand can be expected to be higher than the supply. And the economic principles are quite clear in this case as well: the result will be higher rental prices.