A huge decline in new housing construction compared to the previous year (-53 %), 28 % less flats completed, volume of vacant offer decreased (-12 %), rise of prices of new housing (+23 %)
In H1 2017, a total of 2,603 apartments in 36 projects were completed in Prague, which shows a decline of 28 % on the same period last year. In the second half of 2017, we expect another 3 thousand apartments to be completed which would represent over 5,600 new completions for the entire year (which is 13 % less than last year).
During H1 2017, a total of 1,816 apartments in 35 projects were commenced (started construction) in Prague. Compared to H1 2016, the total number of newly commenced apartments decreased by 53 %. For the entire year 2017 based on preliminary figures, more than 4,000 apartments are expected to start construction in Prague, which compared to 2016’s results represents a significant decrease of 33 % and the lowest figure of new commencements on the Prague market since 2009. The majority of new apartments in H1 2017 were completed in Prague 10, Prague 9 and Prague 5, which form about 71 % of all new deliveries.
Construction activity was still very high in first six months of 2017, yet we registered a small decrease compared to H2 2016. At the end of H1 2017, there were 8,790 apartments under construction in Prague which is 3 % below H2 2016. Nevertheless, H1 2017 represents the fourth strongest period in the last five years.
"The Prague market currently has a limited supply of apartments, there is less and less possibility to buy new housing in development projects. Willingness of foreigners to invest in residential housing in Prague also decreases the availability of affordable housing. A significant decline in housing interest cannot be expected and the market situation with insufficient supply is already evident. However, in three to five year horizon, it will have more significant impacts," commented Lucie Mekhail, senior consultant of Small & Medium Investment in JLL.
During H1 2017, a total of 2,988 units were sold in new apartment buildings and fully refurbished projects, which represents a decrease both on H2 2016 figures as well as on H1 2016. Compared to second half of 2016, the sales activity declined by 21 % whilst year-on-year it dropped by 18 %. It is the weakest result since H2 2014 but in line with 10-half-year average which represents 3,010 apartments sold. The largest volume of sold apartments during H1 2017 was recorded in Prague 5, Prague 9 and Prague 10, which altogether accounted for 60 % of the total sales.
Based on JLL statistics the average sales price for apartments which are currently available (for sale) on the market reached 72,169 CZK per sqm, increasing by 13 % since H2 2016. Year on year, the average price for available apartments is ca. 23 % higher than it was a year ago.
The largest share (29 %) of available apartments on the market is currently being offered for sale with the average price between 55,000 CZK to 65,000 CZK per sqm. On the other hand, the share of apartments in the upmarket category with the asking price at 80,000-100,000 CZK increased from 7 % in H1 2016 to the current 24 %.
"With the declining supply of new apartments, more and more expensive apartments are getting on the market. In 2015, 80 % of new apartments were offered at a price level of up to CZK 55,000 / m2, this year they represent less than 20 %. The total average price for the past two years has increased by approximately 38 %. This was reflected in the number of apartments sold, which, after three years of growth declined by 20 % this year. Due to the decreasing supply of new projects and tightening conditions on the mortgage market, we expect this trend to continue in the upcoming period," summarizes Blanka Vačkova, head of Research Department in JLL.