People's expectations of affordable development and a gradual fall in the prices of new properties often clash with reality. One reason is the growing pressure to implement sustainable solutions. To a layperson, the current situation on the new-build market might seem somewhat paradoxical. The high cost of mortgage loans is dampening demand for buying property, yet prices are not falling. Why? Put simply: there is not much further for them to fall. In the new instalment of the Flat Service guide, we explain what lies behind the current situation and what the outlook is for the future. New-builds are hitting a price floor Ask people whether they would like to live in a healthy flat that does not burden the environment and that is also affordable to run, and the vast majority will say “yes”. The pressure for sustainable solutions is gradually filtering into technical standards for developers and, according to experts, is making new-builds more expensive – often by tens of per cent – though for the benefit of the future. This applies specifically to heating, for example, where demand for heat pumps is rocketing. Most suppliers currently report that they are sold out for this year and are taking orders for installations in 2024. The purchase price of flats is also pushed up by quality windows with triple glazing or smart blinds, which act as a self-regulating mechanism for indoor temperatures. Professional systems in the Smart Home category often cost tens of thousands of crowns. Developers are installing charging points for electric cars in garages, building so-called green roofs or using these spaces for the installation of solar panels. Water is another important topic, reflected for instance in the installation of rainwater tanks or systems for reusing so-called grey water.
Electric car chargers – or at least the groundwork for them – are slowly becoming essentially standard in the garages of Prague new-builds. And everyone pays for it.
On top of that, record inflation is making many inputs more expensive for developers. Building new developments is an extremely energy-intensive business, so current prices of electricity, natural gas and fuel have to be factored into the final price. The shortage of construction workers, linked to the war in Ukraine and long-term very low unemployment in the Czech Republic, does not help either. A chapter of its own is the price of building materials, which in many cases has risen by hundreds of per cent over the past few years. Older properties face costly renovations In theory, the answer could be buying an older property. It is true that the value of flats in uninsulated tenement buildings has rather stagnated over the past year. But the reason is the enormous cost of running them and of any renovation. Thanks to missing insulation, inadequate windows and the absence of any smart solutions, heating such flats can cost a small fortune. That is especially true where heating relies on direct natural gas burning in so-called “vafky” gas heaters, which were hugely popular in flats in Prague's Vinohrady district in the last century. A full renovation runs into the same limits we mentioned in the case of new-builds – expensive labour, building materials and delays in the supply of technology. And the whole situation concerns not only flats, but also holiday properties, for example. For many owners, running them has simply ceased to be financially sustainable. The idyllic idea of a second home in the countryside, far from Covid lockdowns, has most likely gone for good with the year 2023. People are slowly returning to the cities and thinking about where they could save. Renting can be the answer That is why, for example, interest in renting flats in Prague is currently at record levels. We wrote in the previous article in our guide about how prices have risen by roughly 20 to 30 % year on year. Most properties currently find their new tenants literally within hours, and some attract hundreds of enquiries. If you want to maximise the potential income from your rental flat, do not hesitate to contact us. We will be happy to prepare a detailed calculation for the Flat Service Partner and Flat Service Garant services, tailored to your specific property in Prague or the surrounding area.
