Summer 2024
Description:
▶ In the Czech Republic passed the 8th year of the “Office of the Year” competition.
▶ During the reconstruction of the Nusel brewery, a century-old time capsule was discovered.
▶ People paid 86.5% more taxes on real estate than last year.
▶ Exhibition of the Czech Architecture Award.
▶ ČNB does not change the rules for obtaining a loan for housing.
▶ Sekyra Group started the construction of office buildings in Prague.
▶ Prague will have hundreds of new rental apartments.
▶ Digitalization in the application of building permits.
▶ Mortgage loans are going to become more expensive. Banks are afraid of mortgage tourism.
▶ Czechs’ interest in buying of their own homes is growing.
▶ The real estate market in Prague is actively developing.
▶ Foreign investors are returning back to the Czech Republic.
▶ The construction of Panattoni Business Park Kladno has started.
▶ There is an increase in construction activities on the office real estate market in Prague.
▶ Airbnb will be controlled by a new amendment of the Tourism Law.
▶ Banks are issuing more than twice more mortgages than last year.
▶ Prices for apartments in Prague have reached a record and sales volume keeps increasing.
In the Czech Republic passed the 8th year of the “Office of the Year” competition
The eighth edition of the Office of the Year competition surprised once again with the high level of the presented projects. This year, 88 applications were submitted from different corners of the Czech Republic. Radek Prohazka, the chairman of the jury, noted that companies are actively investing in creating unique and comfortable office spaces, reflecting the growth of the economy. This year, the jury, consisting of leading office business professionals and architects, highlighted not only innovative solutions but also a new approach to the use of unconventional materials in design.
The projects impressed the jury with a variety of ways to create a working environment that enhances work quality. This includes the use of light and soft shades, as well as attention to acoustic solutions to create comfortable zones for relaxation and communication.
The competition was organized by Prochazka & Partners with the support of partners such as Casua, eTruhlárna, and Vitra, confirming the significance of the event for the development of office design in the Czech Republic.
During the reconstruction of the Nusel brewery, a century-old time capsule was discovered
On the site of the former brewery in Prague’s Nusel district, a large-scale reconstruction is underway. The complex, built in 1694, will be transformed into a modern urban neighborhood with apartments, shops, and cafes. Although beer production will not resume, a beer hall serving Turnov beer will open in one of the premises. An interesting fact – during the reconstruction, a time capsule from 1924 was discovered, containing documents and prices for products of that time. On one of the notes, builders read that “that year saw a harsh winter with a 20-centimeter snow cover, and ice cutters brought 25-centimeter-thick blocks of ice from the river to the brewery.” These materials were sent to a museum, and their copies were placed in a new capsule to be stored in the renovated area. Special attention was also given to opening the ancient cellars to the public. This historical context adds extra charm to the project and preserves the rich heritage of the place.
People paid 86.5% more taxes on real estate than last year
This year, real estate tax revenues reached 14.6 billion Czech crowns, 86.5% more than in the same period last year. The increase is due to an 80% rise in the base tax rate to compensate for losses from other taxes, such as VAT and income tax. Last year’s total was 12.45 billion crowns. For some property owners, taxes increased by more than 80% due to the increase in the local coefficient: 67 more municipalities increased it this year than last. Tax revenues go entirely to municipal budgets, and if current trends continue, total collection could reach 23.2 billion crowns by the end of the year.
Exhibition of the Czech Architecture Award
The Czech Chamber of Architects has published the shortlist for the Czech Architecture Award – it includes 31 projects out of 307 submissions. The jury noted works of high architectural quality, well-integrated into the surrounding environment, and socially beneficial. Among the nominees are civic facilities, school buildings, and private homes, two-thirds of which are renovations. This year, the prize for exceptional achievement was awarded for the preservation of Gočar’s automatic mill in Pardubice, transformed into a cultural center through the combined efforts of private investors, the city, and the region.
Additionally, a special award went to the bell tower in Krasna for its ecological and aesthetically expressive design. Architect Zdenka Marie Nováková’s project also received an honorary award for her significant contribution to Czech and international architecture. Her works, such as the Chemapol investa building complex in Prague or the interior of the relocated Gothic church in Most, are regarded as key contributions to modern architecture. The best works of the competition will now be exhibited in various cities across the Czech Republic. The finalists and the overall winner of the competition will be announced in November of this year.
ČNB does not change the rules for obtaining a loan for housing
The Czech National Bank (ČNB) has maintained current mortgage lending rules, despite reducing additional requirements for banks. The maximum mortgage loan remains at 80% of the property’s value (90% for clients under 36). The ČNB also recommended caution with loans not related to home purchases, but aimed at renovation or energy efficiency.
The ČNB will reduce additional capital requirements for banks from 1.75% to 1.25%, as risks in the banking sector have decreased. Meanwhile, starting from the beginning of 2025, banks will be required to maintain an additional reserve of 0.5% to protect against structural risks related to global and geopolitical changes.
Sekyra Group started the construction of office buildings in Prague
Sekyra Group has started construction of the office part of a new neighborhood in Smíchov, Prague, which includes the Česká spořitelna campus, a hotel, parks, and a school. Total private and public investment in the project will amount to approximately 30 billion Czech crowns, from which public funds will be spent on infrastructure, including the modernization of the railway station and the construction of a transport terminal. The second part of the project focuses on the construction of office spaces. The cost of construction has increased significantly in recent years, which will be reflected in the final prices. In addition to office buildings, the Smíchov City project includes the creation of modern co-working spaces that will meet the new requirements for a post-pandemic working environment. Ludek Sekyra, owner of Sekyra Group, said that changes in the market, including high interest rates and employees’ habits of remote working, have affected the demand for office space. However, despite a reduction in office construction across the Czech Republic, demand for new space in this project remains strong.
Prague will have hundreds of new rental apartments
Hundreds of new rental apartments will appear in Prague in the next three years. AFI Europe Group is investing billions of crowns in the construction of 800 residential units. In cooperation with developer Finep, which will build more than 300 apartments in the Nová Elektra project, AFI Europe is also realizing the V Koryty project with more than 500 apartments. The total value of the projects is between two and three billion crowns. AFI Europe plans to triple the number of rental apartments in Prague in the next three years. The company has already delivered several projects and intends to continue expanding, seeing Prague as a promising and progressive market. The average rental price of apartments in Prague ranges from 350 to 550 crowns per square meter, which is above the average market price of 400 crowns. Finep is also planning to build about five thousand rental apartments, which will partially help solve the shortage of affordable housing in Prague.
Digitalization in the application of building permits
On 1 July, the new construction law in the Czech Republic came into force, promising faster processes. However, faced with an unexpected flood of applications and glitches in the new digital system, construction authorities found themselves in a quandary. Due to the increase in applications submitted under the old rules, officials are overworked. For example, in Brno Židenica, the number of applications rose from five to ninety per day, and in Tabor from 100 to 900 in the last two weeks of June. In addition, the new system has encountered interruptions. In Prague 12 and Liberec, it is not working properly. In particular, this is due to bugs in the functionality, making it difficult for officials to do their jobs. Spokesmen of city departments report difficulties in filtering plans by region and identifying participants in procedures. The Ministry of Regional Development noted that the current problems are related to the initial stage of implementation and insufficient customization of the system. Changes and improvements based on user feedback are expected in the coming weeks and months. At the end of July, a total of 3,312 officials were working in the system, and 547 applications had been processed, of which only 36 were successfully submitted.
Mortgage loans are going to become more expensive. Banks are afraid of mortgage tourism
Mortgage loans continue to become more expensive despite the reduction of the key rate by the Czech National Bank. The average mortgage rate at the beginning of July was 5.49%, down only slightly from a peak of 6.37% in February 2023. The decline was 0.88 percentage points, while the key rate fell by 2.25 percentage points. Banks, fearing mortgage tourism, are not in a hurry to cut rates and have started charging early repayment fees, which further restrains the decline in rates. The average monthly installment on a 3.5 million Czech crown mortgage fell to 21,475 crowns, only slightly lower than in previous months and 1,000 crowns lower than at the beginning of the year. The market situation shows that no significant reduction in interest rates can be expected in the near future, and banks will continue to be careful about changes in lending conditions.
Czechs’ interest in buying their own homes is growing
After almost two years of stagnation, the interest of Czechs in buying a home has increased again. Real estate prices have also started to rise on the back of renewed demand. For the past two years, the real estate market has been slowed down by high mortgage rates and economic uncertainties, which led to a decline in sales and construction. However, there has been a positive trend since the beginning of this year. Interest rates have started to fall, and buyers have returned to negotiating with banks. According to the Czech Banking Association, demand for housing has increased by 10% compared to last year. Brokers note an increase in the number of determined buyers, which shortens the selling time. The number of inquiries for property searches is also growing. The time to sell apartments has decreased significantly. For example, in Prague, the average time from listing to transaction has decreased from 109 to 84 days. Real estate prices are also rising. The biggest price increase has been noted in the Moravian-Silesian, Liberec, Zlín, and South Moravian regions, where prices have risen by more than 10%. At the same time, the number of offers on the market is decreasing, and many sellers are expecting prices to rise. The same is happening with rental prices. The average rent has increased by 1%. The largest increases were recorded in Olomouc and Hradec Králové, where renting a 70-square-meter apartment costs around 18,500 Czech crowns. In Prague, renting the same apartment costs almost 28,000 Czech crowns.
The real estate market in Prague is actively developing
In the last 6 months, the average price of new apartments in Prague has increased by 1.4% to 152,425 Czech crowns per square meter. Lower interest rates and expectations of price increases have stimulated demand from both buyers and investors. Sales of new buildings have increased significantly, and the number of listings has grown by 5.4% to almost 6,000 apartments. The secondary market has also become more active, with apartment prices rising by 20% to 127,463 Czech crowns per square meter and the time to close a deal shortening. Prices for premium properties, especially large apartments, are also rising. Rental rates in Prague have increased by 6% year on year. Investors continue to invest in the rental market despite rising housing prices. Therefore, the real estate market in Prague is showing signs of revival, with rising prices and strong interest in both new buildings and secondary housing.
Foreign investors are returning back to the Czech Republic
Investment activity in real estate has increased and foreign investors are again interested in the Czech market. In the second quarter of 2024, investment amounted to more than 440 million euros, up 23% year-on-year, while total investment in the first half of the year exceeded 800 million euros. Although dominated by domestic investors, foreign players are gradually returning. The largest part of investment in the second quarter was in office buildings (39%), followed by rental properties (26%) and industrial real estate (17%). The largest transactions this year include the acquisition of the Václavské náměstí 42 building for 140 million euros and the purchase of 306 apartments in the Vysočanský mlýn project. It is expected that investments this year could total between 1,6 and 1,8 billion euros, up from last year’s 1,45 billion euros. Rates of return are forecast to remain stable despite possible changes in European Central Bank interest rates.
“Real estate investments remain attractive and we expect further growth in transaction volumes by the end of the year,” states Lenka Šindelářová, Head of Research from Knight Frank.
The construction of Panattoni Business Park Kladno has started
The construction of Panattoni Business Park Kladno, a modern industrial complex on the site of the former Poldi Kladno steel factory, has started in Kladno. The project includes two warehouses with a total area of 88 500 m2 and consists of two halls: A and B. Construction began in July 2024, with Hall A scheduled for completion in the second half of 2025. The project aims to revitalize the historic industrial district using modern and environmentally friendly technologies such as photovoltaic stations and heat pumps. Recycling of building materials is envisaged. The project will comply with the BREEAM New Construction environmental certification of Excellent level. The construction complex will improve the economy of the region and create new workplaces. The D5, D6 and D7 highways, a railway station, and Prague’s Václav Havel Airport are located nearby, and a high-speed railroad is under construction.
There is an increase in construction activities on the office real estate market in Prague
Prague has seen an increase in construction activity on the office real estate market. Four office buildings with a total area of about 43 900 m2 were built in the second quarter of 2024, and projects with a total area of 166 300 m2 are under construction – 133% more than in the previous quarter. The main projects are located in Prague 4 and Prague 5, including the headquarters of Česká spořitelna. The total volume of office space in Prague reached 3,95 million m2. Only 9% of the current space under construction will be completed this year. Despite the increase in construction activity, the supply of new offices is limited and companies prefer to renew their leases. Rents in the city center have increased to 28-29 euros per m2 per month on average. In the first quarter of 2024, demand for office space amounted to a total of 220 600 m2, which is a record for Prague. The highest demand is observed in Prague 5, followed by Prague 4 and Prague 8. The main tenants are companies from the financial and technology sectors. The vacancy rate increased to 7,9% and the highest vacancy rates were recorded in Prague 3 and Prague 7.
Airbnb will be controlled by a new amendment of the Tourism Law
The government has approved an amendment to the Tourism Act to bring platforms such as Airbnb and Booking under stricter control. Due to insufficient regulation, many short-term rentals are going unregistered, resulting in loss of tax revenue. It is estimated that the state loses up to 792 million crowns a year and municipalities lose 54,9 million crowns. The amendment requires landlords to register guests through the e-Turista portal and obtain registration numbers for the properties. Offenders will face a fine of up to 100 000 crowns and platforms will face a fine of up to 10 million crowns. The rule affects more than 12 000 rental providers in Prague. The amendment to the Tourism Law is aimed to improve transparency and compliance with tax obligations in the short-term rental sector. It aims to prevent the loss of tax revenue and ensure fairness in the market, where many landlords operate as businesses. The introduction of these measures should contribute to more effective regulation and maintain fair competition in the tourism industry.
Banks issue twice as many mortgage loans as last year
In July, banks and building societies in the Czech Republic issued mortgage loans worth 23,8 billion Czech crowns, 5% less than in June but twice as much as in July last year. Interest rates on new loans rose to 5,07%, marking the first increase since May last year. The volume of new mortgage loans, excluding refinancing, amounted to 19,6 billion crowns, down 6,5% compared to June, while the number of loans issued was 5 204, above the average for the year. Interest in foreign real estate, particularly in Croatia, Montenegro, and Spain, has also increased, although such transactions with mortgages are few. The average mortgage loan in July reached 3,77 million crowns, setting a new record. Despite the high vacation season and upcoming changes in mortgage law, demand for mortgages remains strong. Banks note difficulties in processing applications, which may hinder the reduction of interest rates in the near future.
Apartment prices in Prague reach a record high, and sales volumes continue to grow
Prices of new apartments in Prague have reached a record high, exceeding 155 000 Czech crowns per square meter. In the first six months of 2024, 3 500 new apartments were sold, up 112% compared to the same period last year. The housing market in Prague is recovering from the decline in demand in 2022, driven by an improved economic situation, the number of mortgages issued, and rising rental prices. Despite an increase in supply to 5 700 apartments at the end of the second quarter, the total increase was only 6% compared to the previous quarter, which is insufficient to meet the long-term needs of the city for residential real estate. Prices are expected to continue to rise moderately due to high demand and supply shortages. The impact of the new building law and its effect on future permitting rates remains uncertain, which may somewhat slow down the development of the real estate market.