Q1 2023: Prague New-Build Market Revives

The latest Q1 2023 data show a recovery in Prague's new-apartment market. Sales rose by nearly one-fifth quarter-on-quarter. The mortgage market, which has also seen a revival in recent months, will influence the next phase — as will the return of investors. Neither asking nor transaction prices changed materially compared with the previous period.

According to market analysis by developers Trigema, Skanska, and Central Group, this is primarily due to persistently high construction costs, slow issuance of new-build permits, and the temporary deferral of some planned projects.

The start of this year confirmed the expected recovery in the new-housing market, accompanied by a modest decline in mortgage rates and consequently greater demand for home loans. The March results from the ČBA Hypomonitor showed the volume of mortgages granted reached its highest level since last June. Rising new-apartment sales and mortgage volumes alike demonstrate that demand for new flats in Prague remains firmly in place.

"The easing of anxiety over the energy crisis, the stabilisation of new-housing prices, and a range of promotional programmes fed through into demand and helped revive the new-housing market."

– Petr Michálek, Chairman of the Board, Skanska Residential a.s.

In the first quarter of this year, 650 new apartments were sold in Prague — 18% more than in the previous quarter. Year-on-year sales are down roughly 38%, but that figure is comparable to the period when base interest rates were approximately half their current level.

Price stability persists in the new-apartment market

New-apartment prices in Prague continued to rise modestly in Q1 this year. The average transaction price reached 151 951 Kč/m² and the average asking price was 154 990 Kč/m². Both figures represent a 4% year-on-year increase. Quarter-on-quarter, prices are flat.

Construction material costs have partially stabilised, but remain on average roughly 40% higher than at the start of 2021. Price volatility persists for certain commodities, making it harder for developers and construction firms to forecast future trends.

"New-apartment prices in Prague rose 4% year-on-year, while prices of older apartments fell by 6%. New flats are also up to half as energy-intensive as older panel-construction apartments."

– Dušan Kunovský, founder and CEO of Central Group

Supply stagnates within the long-term average range

At the end of Q1 2023, there were 5,550 new apartments available in Prague. That represents a roughly 9% quarter-on-quarter increase and a 73% increase compared with Q1 2022, when supply hit a record low reached in 2021.

Despite a record number of new-build permits issued in Prague — nearly 1,500 since the start of this year — permitting remains sluggish. At this pace, roughly 9,000 apartments would be permitted this year, while the city's long-term need is at least around 10,000 per year.

"Prague would need at least double, and ideally triple, the number of new apartments being built to satisfy housing demand."

– Marcel Soural, Chairman of the Board, Trigema investment group