Reportedly up to 30 percent of new apartments in Prague over two years old remain unsold
Real estate firm Ekospol has issued a press release according to which local developers are planning to build a total 20,756 apartments in Prague over the next few years. And that calculation only includes units with 50 or more apartments. If smaller projects are counted, the total number could be as much as double.
Ekospol says it counted the number of planned new apartments from information from the Environmental Impact Assessment (EIA) database kept by the Ministry of Environment, web presentations by development companies, and announcements by developers in the media. According to Ekospol most of the projects already have planning permission, but in most cases construction has not commenced.
The number of new apartments currently planned for Prague is over 16 percent higher than a year ago, and almost 40 percent more than in early 2010, Ekospol reports.
The question is from where the developers draw their optimism that they will find buyers for the planned new apartments. As previously reported by Czech Position, according to developer Skanska’s residential division, in 2011 a total of 4,562 new apartments in Prague were sold compared to 3,290 in 2010. The company Trigema has calculated that in 2011, between 2,600 and 2,700 newly constructed apartments remained unsold in 2011, and that almost 30 percent of new apartments over two years old are still on the market.
Ekospol’s CEO Evžen Korec predicts that less than half of the apartments projected by developers for Prague will actually be built.
According to figures from the Ministry of Regional Development, in 2011 Czech banks provided 71,088 mortgages to individuals, companies, district and municipal administrations with a total value of Kč 141 billion. The total value of the mortgages was 47 percent higher than in 2010.
Real estate and financial analysts say a number of factors contributed to the large rise in mortgage borrowing last year, principally a rush to buy property before the VAT rise at the beginning of this year, a large amount of mortgage refinancing, and record low mortgage interest rates. With the higher VAT rate and uncertainty over the state of the economy analysts predict a fall in the number of residential property sales in 2012.