Thursday, 13 August 2020

Czech mortgage market contracts by 17% in 2019 – biggest drop since 2009 financial crisis

Prague Daily Monitor |
10 January 2020

The Czech mortgage market dropped significantly, 17%, in 2019 as the Czech National Bank (CNB) curbed borrowing at the top tranches of the market, including minimum down-payment levels. Financial requirements and loan maximums were also set according to income levels and ability to pay. The goal of the CNB seems to be, at least initially, achieved. Running a red-hot housing market in much of the country, the CNB tried to slow down the more risky loans while not stopping quality housing expansion.

Total mortgage volume for 2019 was 181 billion Crowns, the lowest since 2014 when the market was just heating up at 150 billion Crowns. Last year also caps the fourth consecutive year of stagnate or no-growth in mortgage volume for the country. This is a paradox as housing prices have essentially doubled since 2014 and so methodology would assume that volume in Crowns would grow significantly as well.

“December was a better month in 2019 than 2018” said Jiri Feix, Director of CSOB. Feic added “we expect growth in the single digits in 2020, volumes of about 190 billion Crowns. The Director of Mortgage Products at Raiffeisen Bank Milan Voldrich was even more optimistic estimating growth of 10%, meaning volume approaching 200 billion Crowns. Less optimistic was the Commercial Director of Next Finance Jiri Vagner who said “I don’t see a reason that the market would start moving.” Vagner estimated volumes in 2020 of between 160 and 180 billion Crowns.

Supporting the market was the fact that the average mortgage amount reached 2.5 million Crowns which was a record. Consumers were most interested in lock in periods of five years or greater.