Czech real estate market in 2020 and the outlook for 2021
Year 2020 in a few words: The real estate market received a support program, the offer of real estate kept on being low and the appetite to buy strong, and covid-caused trends continued. Let’s go step by step.
Steroids without which the real estate market might look different
Several things happened that fundamentally affected the attractiveness of buying real estate. They include:
- Cancellation of real estate acquisition tax and thus a reduction in the acquisition price of real estate by 4%.
- Extension of the income tax exemption period concerning the sale of real estate from 5 to 10 years. The last chance to profit from the short period was to buy in 2020, and many buyers hurried to make a purchase.
- Fear of money devaluation. Rotary presses of all central banks in the world are running at 150 percent and people with cash are afraid of high inflation. Real estate is considered a safe investment and there was a strong demand to buy property just for the purpose of secure investment.
- Mortgage rates returned to their lows. As central banks cut interest rates to pump as much money into the economy as possible, mortgage interest rates can go down. Cheap loans encourage buyers to speed up their decision. I only add that the Czech National Bank also cancelled the limits on the income of applicants for DTI and DSTI loans.
- Introduction of the government’s Antivirus program, due to which the natural unemployment rate corresponding to the economic situation didn´t show. It is unemployment that fundamentally reduces the demand for real estate, as during that time salaries do not rise, people are afraid of losing their jobs, don´t spend money or don´t want to take risks with a mortgage.
Probably thanks to all this support, the real estate market experienced a further increase in real estate prices and thus continued the trend of preceding years.
The real estate market in numbers continued previous developments
The table below shows data from the real estate market starting with 2016. These are the numbers of transfers at the cadastre and the volume and quantity of new mortgages.
Year 2020 2019 2018 2017 2016
Number of new mortgages
(January to November) 82,275 70,333 92,912 100,327 105,866
Volume of new mortgages
(January to November, in bn. CZK) 224,537 163,587 203,476 205,666 208,144
Average amount of new mortgages
(January to November, in mil. CZK) 2,729 2,326 2,190 2,050 1,966
Number of transfers of title to real
estate in Prague (Jan. to November) 28,655 28,158 31,01 33,371 34,345
Number of transfers of title to real
estate in the CR (Jan. to November) 311,917 318,122 333,983 351,056 365,556
It is clear that sales numbers have been declining steadily year to year. What is the reason for this? People want to buy so the only problem is that they have nothing to buy. Everyone who wants to buy a property will know that right away, there is not enough of it. People keep real estate and don’t sell, and developers build slowly. The decreasing offer of real estate can also be seen in the Sreality.cz portal statistics, in November 2020 there were on average 77,324 advertisements and in November 2019 there were 85,046 advertisements.
The information on the average mortgage amount is also interesting. I consider the 2.7 million to clearly demonstrate that Czechs are very conservative as far as debt is concerned. The repayment of such a mortgage with a maturity of 30 years is about 10 thousand CZK monthly and this is an easily manageable housing cost when considering the average household income.
The city´s future is at stake
Working from home is becoming permanent for many professions. There is not much entretainment and attraction in the city because of government measures, and there is the hustle and bustle, smog and overcrowding on top of this. Today, social contact is commonly maintained online, via a variety of applications. Real estate prices in the city have skyrocketed and at least in Prague are accessible only to a few upper percent of the population. This is a combination that leads families in particular to consider the situation and eventually decide to leave the city for good. That is why there is now such a huge demand for land and houses outside larger towns. 2020 is a turning point in this and has probably started a longer-term trend. The question is how the city will put up with this as it will mean a number of changes. I write more about current trends in Prague here.
Developments in 2021 will not be precipitous (unless something happens that we do not know about now)
Most of the steroids that helped the real estate market in the past year will no longer have an effect and it is also probable that real unemployment will start to show, therefore we can expect a decrease in demand for real estate, but not for all types. Land and houses outside the town will continue to be in demand, as they are still cheap with regard to real estate prices in the town. For the time being, buyers can´t look forward to a major reduction in property prices but it will be easier to negotiate the price. The offer will continue to be very small, and if it grows, it will be gradually year after year with no sudden steep increases. 2021 will be the year when demand and offer will slowly begin to reach some sort of balance.