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Interest in mortgages is growing despite rising prices of Czech real estates

Issued 07.12.2020

Due to the first corona virus crisis at the beginning of this spring, many real estate brokers and financial experts expected real estate prices to fall due to the lower demand for housing and lower demand for mortgage loans.

However, we have not witnessed significant decline in property prices and interest in mortgage loans has remained almost the same.The desire for real estate ownership did not pass even during the crisis. On the contrary, it was supported by the abolition of the real estate acquisition tax and a fall in mortgage interest rates.

However, the coronavirus crisis had a negative impacton output of the construction industry, which will affect future price of real estates. There is still a shortage of apartments, especially in the capital, and the demand for them is really high. Combination of high demand with adecline in newly completed dwellings is putting pressure on real estate’s prices.

In times of financial uncertainty, people and investors may perceive real estates as a safe investment and tend not to postpone real estate purchase any longer. This is also affected and suppoerted by abolition of the real estate acquisition tax and low interest rates in the CzechRepublic. Mortgages fell sharply during the autumn, with interest rates on mortgages below 2%.

This year will probably be a record one for the Czech mortgage market. This is not caused by the high number of newly concluded mortgages, but rather by the growing volume of each mortgage loan. This is closely related to the selling price of real estate, which is growing despite the crisis, albeit at a slower pace. The future development of the level of interest rates is determined by the prices of resources, i.e. prices on the interbank money market. More significant decline in prices is not expected, but other factors also affect the level of the interest rate.

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