Rents Hit Breaking Point While Demand for Apartments for Sale Rises Again

"In our current economic reality, it would seem that the real estate market offers little reason to be optimistic. Rising rates are making financing more expensive, reducing asset values, and crushing anyone exposed to a significant debt burden in the previous era of cheap money. Nevertheless, we at Svoboda & Williams have managed to remain cautiously optimistic,“ states Prokop Svoboda, owner of Svoboda & Williams, in his editorial in the latest quarterly Market Report. Data continues to show that quality real estate is still a relatively safe investment even during a crisis. "Although in the last several months the sample of properties monitored by Svoboda & Williams saw a decline of 2.4 percent, compared to last year’s drop of 15 to 20 percent in equity indices these are favorable numbers," continues Svoboda.

In the first quarter of 2023, clients of Svoboda & Williams paid an average of CZK 155,440 per square meter for new builds and CZK 137,684 per square meter for resales. Meanwhile, the correction in sales prices is leading buyers to purchase larger properties. "The floor area of the apartments sold in the segment we monitor increased by 6.7% to almost 92 square meters, which can be bought for an average of 13.7 million crowns," explains Kryštof Kušiak, analyst at Svoboda & Williams. Another reason to be optimistic is the growth in demand, which is gradually recovering from last year's stagnation. "Although it hasn't reached the volume achieved before the crisis, when in 2022 demand fell by more 30% year-on-year, we experienced an uptick of 20% more inquiries so far this year," says Kušiak. 

Last year, the real estate market also saw record growth in rental prices. But as Svoboda & Williams previously predicted, rents have reached their breaking point this year. "A further increase in prices was halted by the greater supply," asserts David Šimeček, head of residential rentals. "It's expanding due to acquisitions of properties for sale that are temporarily shifting to rental properties because of market stagnation. A number of investment apartments acquired during the covid buying boom are also entering the market," he adds. According to Šimeček, a significant portion of the apartments deemed by the market to be priced too highly are also returning to the rental housing stock. 

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