Demand and supply in Czech building land shift amid broader real estate trends

The Czech real estate market is undergoing a notable shift, with house and apartment prices experiencing a long-anticipated decline in 2024. This drop in property prices has revitalized the mortgage market, with the Czech Banking Association reporting that mortgage activity has nearly doubled since the start of the year. However, the story is different when it comes to building land, where prices continue to rise, signaling a diverging trend.

Land Prices Defy Real Estate Trends

While the broader property market saw sharp fluctuations, particularly during the 2022-2023 boom, land prices have marched upward. In some regions, prices rose as much as 20% year-on-year, only stabilizing by the end of 2023. “By autumn, the growth stopped as demand waned. At that point, the combined cost of land and construction surpassed the market price of finished properties,” said Tomáš Jelínek, Executive Director of Century 21.

Century 21’s data reveals a striking 32% increase in land supply over the past two years, coinciding with a significant drop in demand. For example, interest in building land in the South Moravian Region has plummeted by 40%.

Location Still Key for Buyers

Despite the cooling demand for land, location remains a decisive factor. “Standard building plots have seen a decline in interest, but locations with tourist appeal are still highly sought after,” Jelínek noted. Investors are particularly drawn to areas where future returns seem promising, despite high upfront costs.

The Liberec region is an example, where demand is robust, with prices around CZK 3,200 per square meter. In contrast, regions like Most and Chomutov, where land is priced at CZK 2,000 per square meter, have seen the lowest demand—despite these prices being a bargain compared to other parts of the country.

The Growing Appeal of City Outskirts

Another trend is the popularity of land on the outskirts of larger cities, which remains desirable despite high prices. Michal Macek, founder of Realitní kanceláře Evropa, notes that these areas offer well-equipped amenities and natural surroundings, making them appealing for potential buyers who are still within reach of the market.

Supply has particularly increased in regions like South Bohemia, Pardubice, and Hradec Králové. However, prices vary dramatically depending on the presence of utilities or access roads. “Utilities and access roads can double the price of land, though some plots are priced similarly to those with full infrastructure simply because they offer good views,” Jelínek explained.

Municipal Development: A Bottleneck

Municipal planning—or the lack thereof—plays a significant role in land availability. Jelínek pointed out that even in attractive areas, towns often struggle with outdated zoning policies, preventing the sale of otherwise desirable plots. This problem is particularly acute in larger cities where land may have utilities but no access roads, making development nearly impossible under current regulations.

Land Prices: A Regional Comparison

Unsurprisingly, Prague and its surrounding areas remain the priciest. In Průhonice, land prices have surged from CZK 7,000 per square meter in 2020 to CZK 17,400 in 2024. The Central Bohemian Region averages around CZK 5,400 per square meter, but proximity to Prague drives prices much higher.

In smaller towns, land is significantly cheaper but can fluctuate unexpectedly. Jelínek cited Letohrad, where prices averaged CZK 1,700 per square meter, but jumped to CZK 3,000 in March due to increased demand for more attractive plots.

Buyer Profiles: Who’s Investing?

Land buyers generally fall into two categories: young families seeking to build homes on a budget, often financing through the sale of another property and a mortgage, and investors looking to profit from future developments. There’s also a growing number of investors purchasing land simply to safeguard their capital.

“Land is a limited commodity. Its value will always rise, making it a sound investment, especially for agricultural land, which remains cheap in our country. Many farmers still prefer to rent rather than buy,” Jelínek said.

Long-term Outlook: Land as a Speculative Commodity

As land supply remains constrained by inconsistent municipal planning and rising demand in key areas, prices are expected to keep climbing. Macek believes that factors like interest rates, construction material costs, and zoning changes will affect the pace of price increases, but the upward trend is unlikely to reverse.

“Land will continue to be a valuable, even speculative asset in the long term,” Jelínek added, emphasizing that while demand may ebb and flow, prices will ultimately reflect the limitations of supply.

Source: Century 21