The advantage of buying residential real estate has further collapsed

This follows from data provided by UniCredit Bank. Its indicator, which represents the net annual rental yield, from which the average of mortgage and government bond interest rates is deducted, fell by 40 points month-on-month to minus 3.91 percent in June.

The gross annual rental yield at the level of regional cities in the Czech Republic increased by seven points month-on-month to 3.55 percent, as rental prices added more month-on-month than apartment prices. According to UniCredit Bank analyst Jiří Pour, the disadvantage or unavailability of residential real estate will lead to a weakening of demand and a slowdown in the growth of their prices with a delay. “We still expect real estate prices to start to slow down sharply during the second half of this year, and in the coming years their growth will be lower than inflation,” he estimated.

According to UniCredit Bank, the “least disadvantageous” properties in regional cities were in Ústí nad Labem and Ostrava, while at the opposite end of the scale, Brno maintained its first place, followed by Hradec Králové, which thus moved Prague to third place. The tension indicator fell month-on-month in all regional cities, mostly in Jihlava, by 72 points, in Hradec Králové by 67 points and in Ostrava by 61 points. In all cases, the reason was a drop in rental prices, and in Jihlava a strong rise in apartment prices, according to the bank’s data.

The Czech National Bank (CNB) stated on Thursday that real estate prices at the end of 2021 were about 40 percent higher in the Czech Republic than would correspond to the level of median household income and required real estate rental income. That is 15 percentage points more than half a year ago. “In an unfavorable scenario, property prices would fall by as much as almost 30 percent in three years. We rate this scenario as very unlikely, but the chances of it occurring are higher than in the past, ”said Jan Frait, Director of the CNB’s Financial Stability Section. In the baseline scenario, however, the CNB does not expect housing prices to fall in absolute terms, but only to stop rising.

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