Construction of hundreds of homes, which developers had wanted to postpone until next year, will begin this year after all. The renaissance is most notable in Prague and Brno, where housing prices have stopped falling and have even started growing again after a year-long decline. The price growth, indicating the end of the real estate crisis, is motivating developers to change their plans.
“We considered putting off the launch of construction of some projects if we did not have preliminary contracts for sale of half the flats. But demand for our flats persists,” said Evžen Korec, head of Ekospol.
In October, Ekospol will start building 90 flats as part of the first stage of its Panorama Kyje project and will launch construction of 58 flats in the project U Vinořského zámku. In December, the company will start constructing 136 flats in the project Viladomy Uhříněves. Demand for homes, which was the initial impulse to continue with construction, was provoked by lower prices.
“We have revised our costs and reduced the rate of our profit by up to two-thirds. In the current situation, a developer has to focus on maintaining market share, not profit. What helps sales is our guarantee of the lowest price. If anyone finds a cheaper flat in Prague with comparable parameters, we will sell him our flat at a lower price and give him an additional CZK 50,000,” said Korec.
Central Group also wanted to put off its new residential projects until next year. “But if demand develops reasonably, we will start construction already in the autumn of this year,” said Central Group head Dušan Kunovský, whose company will launch construction of Prague projects Prague Towers and Nové Letňany yet this year.
Finep has decided to start this year the fourth stage of construction in Harfa in Prague. Stavconsult Projekt is preparing construction of 85 flats in its Nová Cihelna project in Pardubice.
The readiness of construction companies also plays into the hands of developers. Despite the crisis, construction output rose by 0.1% year-on-year in June.
New projects are smaller than the previous ones – just dozens of flats, not hundreds. At the same time, they are cheaper than the Prague average of CZK 57,500 per square metre, according to Jones Lang LaSalle. Price of homes in new projects are 10%-15% lower.
However, some developers are still postponing or cancelling their planned projects owing to the real estate crisis. Orco has given up on its residential projects in Kutná Hora and Vrchlabí, and Discovery Group has put off construction on its Palmovka One project.
