Czechia: New flats are increasing, but they do not cover the demand in large cities
The number of new flats in the Czech Republic has been gradually growing over the last ten years. According to the Czech Statistical Office (ČSÚ), 20,925 flats were completed in the Czech Republic in the first seven months of the year, 56 percent more than in 2013 and 16 percent more than in 2018. Nevertheless, developers and some experts have repeatedly stated that housing construction in the Czech Republic is insufficient. According to real estate experts, there is a shortage of apartments especially in large cities and their surroundings, where people are moving from smaller settlements. According to the Czech Statistical Office, although the number of new flats in Prague has gradually increased over the last ten years, the experts say it does not meet the ideal limit of 10,000 flats completed annually.
"At first glance, there are enough flats and houses in the Czech Republic. However, at second glance we find that they are often located in places where people do not want to live. Young people often do not want to return to smaller towns and villages after studying in big cities. Increasing longevity in turn leads to properties from older generations reaching younger generations later. In one extended family, the housing situation often needs to be addressed in four different generations," said BH Securities economist Štěpán Křeček.
According to Petr Hana, a director in Deloitte's real estate consulting department, more construction activity is always in the largest Czech cities and their surrounding areas, such as Prague and the Central Bohemian Region. On the other hand, it is lowest in remote areas and in post-industrial regions, where the population tends to decline and where property prices are on average lower. In these areas, demand for housing is low and investment in new housing is therefore not worthwhile.
"While people are leaving the peripheral regions for the cities in the long term, housing is staying there. Relatively declining demand from households and a fixed supply of real estate lead to property prices in regions with a low attractiveness index being below the replacement cost of construction work," Hána said. In contrast, demand is high in large cities.
In Prague, construction of 3,117 apartments started from January to July this year, which is 62 percent more than in 2013 and 58 percent more than in 2018. The number of completed apartments is also increasing. In the first seven months of the year, builders completed 3,730 of them, 63 percent more than in 2013 and six percent more than in 2018, according to data from the Czech Statistical Office.
But this increased construction is still not enough to satiate demand, according to Petr Dufek, an analyst and economist at Banka Creditas. Construction was delayed at a time when prices of flats on the market were already at a record high. "Since last spring, we have seen a rapid decline in housing construction again. Looking at the annual cumulative data, construction started in March last year, when over 10,000 flats started to be built in Prague," Dufek added.
According to the Czech Statistical Office, more than 1.37 million people lived in Prague at the end of June. This is approximately 130,000 more than in 2013 and 70,000 more than in 2018.
"Data from mobile phone operators show that there are about 300,000 more Czechs living in Prague than the official data shows according to permanent addresses on ID cards. It is administratively difficult to re-register. This means that even though more apartments are being completed in desirable locations, this is still desperately low compared to the actual need," Křeček said.