Czech Property Prices Continue Downward Spiral

The Czech National Bank reports that prices continue to fall in the country’s residential real estate market, with asking prices slipping another 5.2% in 2011. With the country’s …

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The Czech National Bank reports that prices continue to fall in the country’s residential real estate market, with asking prices slipping another 5.2% in 2011. With the country’s economy now in recession, the average price of apartments has fallen to €69,478, although prices in Prague 1 and Prague 2 are faring much better. Further economic contractions are expected in 2012, and the government has acted to shore up the budget deficit by raising the VAT for the second time since January 2010 to 14%. Another hike is on the horizon, though, as Czechs prepare for the unified 17.5% VAT that will take effect in 2013. For more on this continue reading the following article from Global Property Guide.

After four years of price falls, the Czech Republic’s residential market remains depressed.

Apartment asking prices dropped by 5.2% (-7.4% inflation-adjusted) in 2011, according to the Czech National Bank (CNB). In Q4 2011, apartment prices fell by 0.9% (-1.4% inflation-adjusted), and are expected to fall another 4% in 2012, according to analysts. Transactions last year were 20% below the peak levels of 2008.

The Czech economy is now in recession.  It is expected to contract by 0.2% in 2012, having shrunk by 0.3% q-o-q in Q3, and 0.1% q-o-q in Q4 2011. In 2011, the economy expanded by 1.7%, following growth of 2.7% in 2010.

To cut the budget deficit, VAT was hiked in January from 10% to 14% (lower rate VAT).  This is the second VAT rise since January 2010, when both standard and lower VAT rates rose by 1 percentage points, to 20% and 10%, respectively. In 2013, VAT will be unified at 17.5%.

The lower VAT rate applies to selected goods such as food, medicines, books, new housing units and housing-related expenses (water and heating). While only imposed on new houses, the increase will weaken overall demand.

The average apartment price is CZK1,747,244 (€69,478), according to realitymorava.ck, the leading residential portal.  Prague 2 has the most expensive housing.  The average apartment price is CZK4,889,909 (€194,445), followed by Prague 1, with an average apartment price of CZK4,453,595 (€177,095).

This article was republished with permission from Global Property Guide.

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