Thursday, 29 November 2018

Fewer new flats to be built this year

By Vladimír Kaláb |
29 January 2009

Developer project. (ČTK)

Big developers will put on sale more than 4,000 new flats in Prague this year. Hundreds of other new flats will be completed in Brno, Hradec Králové, Plzeň, Most and other towns.

According to the Czech chamber of real estate agencies (ČKRK), the demand for new flats dropped by 30% last year and developers have been offering new cars as a bonus to the last flats from their completed projects that they still need to sell.

The crisis in the real estate sector, however, does not mean that the construction of new projects will be halted. On the contrary, for a financially sound developer the current situation is favourable, says Petr Novotný from the real estate team of Ambruz & Dark law firm.

"Pessimistic prognoses ecpect a change on the market only in 2010. And the developer could plan completion of the first flats for that time. That's when the offer on the market will be smaller because of the projects that had to be halted or postponed this year because of lack of financing.

For example the companies Skanska Reality or Ekospol are building flats from their own money, with no bank loans. At this moment, they are purchasing land for their projects.

"With regard to the stricter conditions for project financing, many projects have been halted or sold as a whole. That's why the offer of new flats will be smaller by up to one half by estimate. This will lead to the lack of new flats on the market and higher prices," says Evžen Korec, the general director of the developer Ekospol.

There will be less new projects

While this year's offer of flats is expected to still be optimistic as projects initiated at the time of the building boom will be completed, the crisis will be reflected in construction plans.

Big developers no longer compete with each other as to the number of flats; their new projects are smaller. The companies are more careful in considering which location will be the most suitable and what equipment should a flat have so that it is marketable.

This year, developers in Prague are planning a construction of 2,500 new flats, one third less in comparison with last year.

Some companies, like for example Hochtief CZ, Orco or Czech Property Investments (CPI), are keeping their new projects under their hat and are not planning any construction for this year.

"This year we will finish nine luxury flats of the Prague project Na Výši. We are not planning any other construction of residential projects at the moment," CPI's spokeswoman Michaela Winklerová says.

Other developers, like for example Crestyl with its Prague project Dock that consists of sixty luxurious residences in the port between Karlín and Libeň, say they need more money to start with construction.

"The construction of the project can start at the moment when the financing conditions of the loan are fulfilled," says Kateřina Váně from Crestyl.

Similarly, the developer Finep is mulling over its project Harfa Park, a fourth phase of the project Nová Harfa, which comprises also terraced houses besides flats.

"Construction could be boosted by fall in average prices of flats with regard to the temporary lowering of VAT, as suggested by the Association of building entrepreneurs. Ekospol supports this step, as it would also mean growth in sectors connected with construction, including lower unemployment rate," Kadlec says.

People prefer to pay rent

Decline in the number of sold flats caused by stricter conditions set by mortgage providers has been reflected in the growing interest in rented housing – in some locations, such as Ostrava, even by 50%.

The company EuroNet Media reports about a 38% higher interest in rented housing on the website Also the director of the real estate agency Hot Reality Plus, Miroslava Klímová, has recorded a 30% growth in demand year-on-year.

The demand for rented housing for the whole of 2009 will by higher by 20% in comparison with last year, according to's head Aleš Budín. In his opinion, the market rent will rise by approximately 10%.

The head of Hot Reality Plus says an opposite tendency is now evident on the market. "The rent is currently falling. Maybe it sounds like a contradiction, but there are many rented flats on the market," Klímová says.

However, Lucie Mazáčová from EuroNet Media expects that in the next months the demand for one's own housing will prevail over rented housing.

Translated with permission by the Prague Daily Monitor.