Own housing is purchased for many years in advance, even in the order of tens of years. Several economic cycles, price corrections and fluctuations will pass during these years, points out Jakub Veverka, chief economist at Videobydleni.cz.
Looking through the current macro-conditions, it is always true that at the peak of the economic cycle or beyond the peak, where we are now, discount rates are always higher and real estate prices are in correction. The question in the crystal ball is whether the eventual recession will be deeper or shallower.
However, if it is necessary to solve the issue of housing quickly, then in this period it is necessary to choose a shorter interest rate fixation – one, two, three years and wait to see where the rates develop. Currently, we can expect a decline within the year.
Subsidies can affect the price of family houses before reconstruction
As for real estate prices, in this case the market is very segmented and it is not possible to give a uniform answer, especially in terms of categories (apartments, family houses). In the category of single-family homes, the correction is still ongoing and has a downward trend.
This applies especially to older family houses before reconstruction. In this segment, the “repair grandma’s house” subsidy can affect the price – the situation will have to be monitored further. However, thanks to this subsidy, some objects in a worse condition can appear as a suitable investment and their decline can be stopped.
The smaller apartment segment looks like it has already bounced off its bottom and may grow by several percentage points in the coming months. It also depends a lot on the region. We expect that similar to the rapid decline in apartment prices in the Moravian-Silesian and Ústí Regions in the past, growth will also start in these locations.
These regions are a litmus test for price fluctuations. The prices of smaller apartments suitable for investment in these regions went up during the holidays and have gained a few percent in recent months. If this is already a confirmed trend, only the next period will show.
Rents will rise faster than sales prices
Rental prices will rise 3-5% faster than the price level of properties for sale, for several reasons.
It is still slowly being built Long-term interest rates will fall Demand for property acquisition is increasing again from August 2023 Energy prices are still high
From this point of view, we recommend not waiting and purchasing a property for your own residence. In the event of a drop in interest rates, we recommend refinancing the loan when the rates drop by at least 2% from the current rate.
Macro lens
The Czech Republic is one of the countries in Central Europe that is dependent on German exports. So we are at least half dependent on exports to Germany. Germany is already in recession for the third quarter, i.e. for at least two quarters its economy is not growing, but declining by several tenths of a percent. If the German economy sneezes, its supplier countries get the flu. Yes, this also applies to the US and EU economies.
The Czech economy does not grow at full employment. We have reached the ceiling of production possibilities and our economy is still at risk of a wage-inflationary spiral. Although inflation is decreasing month-on-month, it is still not a reduction in prices, but an increase in the price level. Real wages are currently turning positive, i.e. nominal wages are growing by higher percentages than prices are rising.
We are currently talking about a few tenths of a percent to plus. In nominal terms, wages for 2Q 2023 are growing by 8.8% year-on-year, and July inflation is at the level of 8.6%. Our real wages have therefore stopped falling, but this does not apply to our savings, which continue to lose value at the rate of inflation.
Author: editors
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2023-09-30 04:11:13
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