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News Release

Prague

Residential Prices in Prague and Czech Republic in the year 2011        


Prague, 9 January 2012 - Prices of new flats in Prague dropped by 4.5% on average in 2011. While one square meter of a new flat in Prague cost on average 56,500 CZK by the end of 2010; twelve months later, the average price of a new flat decreased to 54,000 CZK per sqm. The average prices of new residential housing dropped by tenths of basis points throughout 2011 until November. Shortly before the end of the year 2011 we recorded a slight increase in residential prices which probably reflects the decreasing number of new residential schemes coming to the market and a slightly increased demand related to the announced increase of VAT for new residential housing as of 2012.  
  
In parallel with the price drop of new residential housing, the prices of older flats in Prague also dropped, although the decrease was larger than those of the new flats. In December 2010, the average price of an older flat in Prague was approximately 40,000 CZK per sqm and at the end of 2011 the price was 5.3% lower and stood at 37,800 CZK per sqm. Unlike prices of new flats, the curve of decrease of the average prices of older flats showed the biggest drop in the first half of 2011, with the decrease in the last six months being relatively modest.       
         
"Whereas the drop in the new housing price level last year was mainly due to the fact that new residential schemes coming to the market were in the low-priced segment (40,000 – 45,000 CZK per sqm); the decrease of the second-hand housing price level was caused by the higher flexibility of individual sellers. In contrast to developers who prepare exact calculations of cost and expected return, private sellers are more flexible on this and they also more often take their individual situation and required speed of the sale into consideration,” says Ondřej Novotný, Head of Research at Jones Lang LaSalle Czech Republic.        
Average prices of new and older flats in the Czech Republic (outside Prague) also dropped but less dramatically than in Prague. The average price drop stood at 3.5% in 2011. By the end of 2011 the average price of a new flat in the Czech Republic was approximately 32,000 CZK per sqm; with the average price of an older flat standing at 23,500 CZK per sqm. However, we would like to point out that the average reference figure and the residential prices in a particular regional city will vary or differ according to the local market conditions. As far as new residential housing is concerned, we saw the highest year-on-year price increase in Brno and Plzeń (5 – 8%) and the biggest decrease in Ústí nad Labem and Liberec (10 – 15%).

"This year, price remains key in the decision making in relation to buying or not buying housing. Thanks to the relatively fierce competition on the market, I expect that developers of new residential schemes will be forced to compensate for the increased VAT rate by special discounts that will follow the advertising campaigns from last year, especially during the first half of 2012“ says Ondřej Novotný, Head of Research at Jones Lang LaSalle Prague.  
    
Based on information from the Czech National Bank, we understand that loans granted for all types of residential housing reached a volume of 160 billion CZK in 2011, out of which, mortgages formed 115 billion CZK. Compared to 2010, the residential mortgages volume in 2011 increased by 35% and reached a similar level to 2008.  
 
Forecast for 2012 
"We do not expect any major changes in real transaction prices in 2012. Thanks to more budget housing streaming to the residential market in Prague, we anticipate a further decrease of the average prices in the residential statistics by approximately 3%,” adds Ondřej Novotný and continues: “activity of the buyers and their willingness to sign to long-term commitments (mortgages) is clearly linked to the situation on the labour market. Uncertainty regarding the future development of the economy is unlikely to disappear and therefore, residential sales of new flats are very likely to diminish again. Even though granted mortgage volumes began to grow again over the last few years (mainly thanks to the higher activity of banks offering mortgages and limited state support for building savings), the percentage of unpaid mortgages also increased. From 2008, when unpaid mortgages made up 1.5% of the entire volume, they increased to 3.1% at the end of 2010. Since then, unpaid mortgages have remained at the same level and will persevere this year as well.”