<p>Apartment prices will decrease this year to the level of 2006.</p>

Source
Filip Dušek
Publisher
ČTK
18.03.2009 16:05
Czech Republic

Prague

Prague - According to a current study, apartment prices in the Czech Republic are expected to drop this year to the level of 2006. Old apartments in built-up areas may decrease in price by up to 20 percent compared to 2008, while apartments in panel buildings may fall by 20 to 30 percent. Prices for new apartments are anticipated to decrease by five to 15 percent. A comprehensive study was presented to journalists today by Deloitte and Hyposervis.
    The study expects demand for new residential properties to drop by up to 45 percent this year, also reaching the level of 2006. It also anticipates greater differentiation among types of apartments based on their standards, location, and civic and transportation amenities.
    The main reason for the current decline in the Czech housing market and mortgage market is not the global economic crisis. Primarily, the last 12 months have been characterized by the correction of the unnatural growth of both markets in 2007, related to the increase in VAT on residential construction, said Diana Rogerová from Deloitte.
    According to her, the consequences of the global crisis are more secondary, such as the outflow of speculative investors, expectations of falling apartment prices, or fears of a decrease in household income. "Fluctuations in demand for housing, as well as its price, are common around the world," she noted.
    The current situation may have significant impacts on rental prices, especially for more expensive apartments, where annual yields could drop to one to two percent. In contrast, the cheapest apartments are said to maintain a yield of around four to five percent per year.
    The number of real estate agencies in the Czech Republic is, in proportion to the population, significantly higher compared to other countries. "A reduction in the number of real estate entities by 50 to 65 percent is expected, particularly among small 'garage' firms, while the position of large and established real estate companies is likely to strengthen," the study pointed out.
    Milan Roček, the head of Hyposervis, does not expect a fundamental drop in the mortgage market but anticipates a decrease in both the number and volume of mortgage loans proportional to the decline in new apartment sales. "The Czech market will remain sufficiently liquid, capable of satisfying the equivalent of current demand," he stated.
    The study is based on five months of data collection and evaluation of current connections supplemented by a survey among all banks, mainly development companies, and a qualified group of clients who have shown interest in new housing in recent years. Deloitte focuses on services in the areas of audit, tax, consulting, and financial advisory. Hyposervis is a mortgage loan intermediary in the Czech Republic.
    Prices began to decrease concurrently with the onset of the economic crisis at the turn of last year and this year. This was also confirmed by the latest data from the Czech Statistical Office. The growth of asking prices for apartments nearly stopped in the third quarter of 2008 for the first time since 2005.
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