Real estate prices could fall in the event of a dramatic decline in demand or a significant increase in supply. Demand is currently declining due to a decrease in residents’ purchasing power, an extreme rise in real estate prices, and reduced access to mortgages—caused by rising interest rates and the introduction of mortgage regulations.
On the other hand, demand will continue to be driven by investment purchases and cash buyers, for whom real estate represents a safe investment vehicle. Furthermore, investors can expect rising returns in the future, as the rental market is already experiencing rapid growth and increased demand, particularly from clients who can no longer afford to own their own homes. We are also seeing increased interest in rental apartments from Ukrainian refugees, though this will only be temporary, depending on the duration of the war.
The supply of real estate will remain very low because the debate on the eagerly awaited construction law—which was intended to speed up permitting processes—has been postponed. The fact that the number of housing starts increased last year will do nothing to change the situation of insufficient construction. This increase was only temporary and therefore cannot offset the deficit that has been building up for years.
Developers will not be able to afford to lower real estate prices, as they must factor in rapidly rising construction costs and building material prices. In the coming period, therefore, we do not expect prices to stagnate or even decline, but rather a slowdown in their growth.
Thanks to personnel changes at the Czech National Bank (ČNB), the rise in mortgage interest rates may be less dramatic than previously expected. Nevertheless, interest rates are likely to continue rising slightly. Unnecessary delays in purchasing a home will thus make the mortgage more expensive. Mortgages with current interest rates around six percent may seem high and are already out of reach for some clients, but for those who can afford a mortgage, we highly recommend it. Compared to inflation of about fifteen percent, this form of long-term investment remains advantageous.
The answer to the question “When is the right time to buy real estate?” is therefore clear—if you can, buy now. Real estate prices will not fall in the future, and mortgage interest rates will continue to rise. Investing in real estate has always been a safe hedge against inflation, but this is doubly true given the current economic situation.
