The number of available apartments has been dropping over the last six months. Credit: Freepik.
Brno, July 19 (BD) – Hundreds of new apartments have disappeared from the Brno real estate market. While at the end of 2022 there were a total of 1,547 units available in new buildings, by the second quarter of 2023 this had decreased to 1,229 apartments. Data from Trikaya shows that in the first half of the year, just under a third more apartments were sold than in the second half of last year. The average price remains stable, ranging from CZK 124-127,000 per square metre in the last year.
“The interest in new apartments in Brno is not abating,” said Dalibor Lamka, executive director and chairman of the board of Trikaya. “While we are still not at the numbers we had before the conflict in Ukraine broke out, the market is gradually starting to recover. Compared to the second half of 2022, there was an increase in sales by around 30% in the first half of this year.”
However, as the market is slowly coming back to life, the supply is getting thinner.
In the second quarter of this year, a total of 105 apartments were sold, roughly the same number as in the first quarter (108). The most units were sold in Zábrdovice and Královo Pole, mainly two-room apartments, which cost an average of just under CZK 7 million crowns.
The number of available apartments has been dropping over the last six months. While 1,547 new constructions were available at the end of 2022, at the end of the first quarter it was only 1,436, and in the second quarter the supply decreased 14% quarter-on-quarter to 1,229 units, the lowest in the last year. Only 39 were newly placed on the market.
“In recent years, hundreds of apartments in development projects were routinely put up for sale every quarter,” said Lamka. “In the first quarter of this year, however, only 82 units were released, and in the last quarter only 39, less than in any single month of last year. In contrast, almost 250 apartments disappeared from the market within three months. Just over 100 of these are newly released transactions, in the case of some projects, the developers decided to change their strategy and withdrew the apartments from the market in order to rent them later.”
The situation is similar in Prague, where several thousand new apartments were previously sold per quarter. In the last year, however, the supply of apartments has been growing by fewer and fewer apartments every quarter.
The price continues to stagnate, and it is mainly smaller and cheaper apartments that are being sold
The asking price peaked in the second quarter of last year, when the average value climbed to a record CZK 127,200 per square metre. Since then, it has remained stable at around CZK 126,000 per metre. It reached its lowest level, CZK 124,800, in the last quarter of last year. There was no significant change from April to the end of June 2023; new builds in Brno were put on sale for an average of CZK 126,400 per square metre during this period.
Compared to the previous two quarters, however, there was a change in selling prices. While the price of apartments in realised sales remained slightly above the average offer price for half a year, in the past quarter it fell to CZK 121,600 per square metre.
“Now mainly smaller apartments in more affordable projects are being sold,” said Lamka. “Most units were sold with a 2+kk layout. The selling price for those was also lower than for larger apartments, specifically at CZK 120,500 per square metre. However, there is also interest in more luxurious apartments with layouts of 4+kk and more. Considering their average price of around CZK 14 million, they are mainly purchased by more mobile buyers with sufficient equity.”
The development of apartment prices will affect the availability of mortgages and activity in the construction industry
“Even in the coming period, we assume that buyers will be in a stronger position on the market than sellers. Although the Czech National Bank is loosening the DSTI limit, mortgages still remain an option for a narrow circle of high-income households,” said Vít Hradil, chief economist at Cyrrus. In addition, he said the prevailing opinion in Czech society is that the current high mortgage interest rates are only temporary, which is motivating households to wait for a more convenient time to buy.
“In addition, the continuing reduction in real wages will encourage Czech consumers to be cautious. However, the observed decline in purchasing power is already beginning to manifest itself in a slowdown in construction activity, as the number of housing starts falls. They will thus be missing from the market at the moment when the demand side revives. This could happen already by the turn of the year, when interest rates should head downwards, and on the contrary, the consumer confidence of Czech households should experience a significant improvement,” concluded Hradil.
