Analysts: Housing construction in the Czech Republic is still insufficient and is pushing prices up

Prague – Although construction has strengthened in year-on-year comparison since last November and the number of new apartments started in September reached this year's peak, analysts consider housing construction in the Czech Republic to be insufficient. According to them, the lack of housing remains the main factor driving up its prices.

According to data from the Czech Statistical Office, construction began on 3,556 apartments in September, which is a fifth less year-on-year. Completed were 2,960 apartments, nearly 70 percent more than a year ago. The indicative value of the constructions for which permits were issued amounted to 41.5 billion crowns, which is eight percent less than last year.

"Construction is thus benefiting from ongoing projects and large developments, but the number of new projects started remains limited," stated Petr Kymlička, partner at a consulting group.

According to Martin Gürtler from Komerční banka, this year remains one of the worst in terms of the number of building permits for housing since 2002. "In the first nine months of this year, an average of 1,887 residential buildings were authorized each month, while before the pandemic it was about 2,500, and in the first decade of the new millennium, statistics even hovered around 4,000 per month," he noted.

Overall construction production in September increased by 12.8 percent year-on-year, compared to 17 percent in August. The production of civil engineering, namely the construction of roads or energy networks, increased by 15.9 percent, while building construction rose by 11 percent. Last year's results were affected by rainy weather. Month-on-month, however, the sector weakened by 3.2 percent.

The demand for residential construction, according to chief economist Lukáš Kovanda, remains strong despite still high interest rates. Mortgages are twice as expensive compared to the period before the COVID-19 pandemic, but, according to Kovanda, the demand for them is comparable.

Current construction, according to Ondřej Boreš from Velux, does not meet the future demand from the strong demographic groups born between 2005 and 2010. "To be able to offer appropriate housing to these growing children, at least twice as many apartments would need to be built in the Czech Republic each year than now," Boreš stated.

Boreš also added that construction is hampered by a complicated and lengthy approval process. "Without necessary changes, there can be no expectation of a rapid recovery of the entire construction sector; this year, the sector will not grow significantly either," Boreš told ČTK, adding that new apartments are not increasing in some regions.