News for May 2024
Description:
▶ Mortgage interest rates have fallen, but people are taking out more loans due to rising prices for housing
▶ Apartments are becoming more expensive again, developers are raising prices
▶ CNB predicts economic growth this year
▶ The CNB lowered the rate to 5,25 percent
▶ The price growth trend is confirmed in the secondary housing market as well
Mortgage interest rates have fallen, but people are taking out more loans due to rising prices for housing
In April, banks issued mortgage loans in the amount of 21.9 billion Czech crowns. Compared to the same period last year, this amount doubled. The average rate on mortgage loans issued fell to 5,1 %. In April, this rate was 5,89 percent. The rate on refinanced mortgages was 5,06 percent, compared to 5,22 percent in March. This was reported by the Czech Banking Association.
If we take seasonality into account, the growth in the volume of mortgages issued will be even higher, because April is usually weaker than March. So, the double-digit month-on-month growth confirms the recovery in mortgage activity. However, the gradual reduction in mortgage rates and the lowering of the income restrictions by the Czech National Bank are also allowing for more mortgage applications, the association stated.
«The rise in average mortgages is partly explained by the increased need for financing due to rising real estate prices. Also, the gradual decline in interest rates accompanied by rising wages has played its part, allowing applicants to achieve a higher mortgage,» said Jakub Seidler, an economist at the Czech Banking Association.
Apartments are becoming more expensive again, developers are raising prices
The market of new apartments is going through fundamental changes. While in the last two years it was dominated by buyers who could push developers to discount prices, now sellers are starting to prevail. Their strong position will allow them to raise prices again this year. The first developer, Skanska Residential, represented by its chairman Petr Michalek, has already announced that this will happen in a few weeks. The price increase may affect the projects that will go on sale in May and June. We are talking about apartments that the company is building in the Prague Kbele and Malešice areas. For example, in the former, prices for two-bedroom apartments with an area of just over 70 square meters are currently around 8 million Czech crowns. The new offer could be higher by an order – buyers will pay around 200 000 CZK extra.
«We are relying on a big market recovery. Pent-up demand is coming back. The first quarter of this year was very strong and surprised me personally,» Michalek added.
The first three months of the new year have been among the best in terms of apartment sales, with companies selling 2.5 times as many apartments compared to last year. Interest in new apartments is reviving in the regions as well. The number of those willing to buy an apartment may increase if mortgages become cheaper again. During this year, according to developers, new buildings should rise in price by about five percent, i.e. by about half a million in each case. CNB expects similar price increases for all Czech houses and apartments.
CNB predicts economic growth this year
The Czech National Bank (CNB) has improved its forecast for the country’s economy. Gross Domestic Product (GDP) will grow by 1.4% this year, while the CNB’s February forecast called for 0.6% growth. The CNB lowered its inflation estimate for this year to 2.3% from 2.6% in February. The new macroeconomic forecast was announced by CNB head Ales Michl. According to the forecast, inflation is expected to fall to 2.3 percent this year from 10.7 percent last year. The Czech economy rose from the bottom at the end of last year and growth continued early this year.
«As inflation falls, real incomes are recovering,» Michl said.
However, according to the CNB analysis, the economy is still below its potential and demand from the domestic and external economy remains weak.
«We are seeing signs of recovery in external demand and it is forecast to accelerate during this year,» he added.
The CNB lowered the rate to 5,25 percent
The benchmark interest rate continues to fall and now stands at 5,25 percent. The Board of the Czech National Bank (CNB) decided to cut the rate by half a percent. The prime rate is now the lowest since May 2022. According to Jakub Seidler, chief economist of the Czech Banking Association the decision of the CNB will not have a noticeable impact on mortgages. The CNB Board also decided to reduce two other rates by the same amount: the pawn rate is now 6,25% and the discount rate is 4,25%.
The price growth trend is confirmed in the secondary housing market as well
Prices for older homes continue to rise little by little. The trend already indicated by reports from last year has been confirmed by the data for the first quarter of this year. While 6 cities in Czech Republic recorded slight price fluctuations in year-on-year comparison, in quarterly terms, in contrast, real estate price growth prevailed in all cities, both in new buildings and in the secondary market. However, the secondary real estate market has not yet overtaken last year’s figures everywhere, for example, in Prague old houses were sold almost 7 000 Czech crowns per square meter cheaper than a year ago, which means that last year people bought a house of 150 square meters almost 1 million Czech crowns more expensive. Prague is thus one of the 6 cities that stand out against the national average on a year-on-year basis. In addition to Prague, the analysis also showed cheaper old houses in other regional cities. In Brno, the year-on-year savings in buying an old house amounted to two percent, which means a price reduction of about 260 000 Czech crowns. The situation is the same in Ostrava with a 5 % increase and in České Budějovice with a 7 % increase. However, the price analysis of old houses after reconstruction in the quarterly comparison has already shown a price increase in most cases.