Prague Real Estate Market
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Prague Real Estate Market

These figures apply to 2004.

Due to currency exchange rates these figures in Euro today are a bit different.

But the other percentages remain the same.

The average monthly wage in Prague is 150% of the average wage in the rest of the Czech Republic and an estimated 22% of top wage earners in the Czech Republic (250.000 people) work and live in or near Prague.

Increased wages have created strong consumer spending which in turn is driving economic growth and although Prague represents only 11% of the overall Czech population, the city of a hundred spires accounts for 40% of total retail expenditure in the Republic.

Of the 5 million Czech work force only 2% earn a monthly salary of over CZK 40.000 (Euro 1,300 ) but 65% of these high earners - about 66,000 people - work and live in Prague.

Another 20% of the work force earn between CZK 21,000 to 40,000 monthly salary (Euro 700 to 1,300 ) and this is the fastest growing earner segment of the nation's work force.

Salaries in this segment have grown 40% within the last 5 years and an estimated 180.000 people from this segment live and work in Prague.

This is the group to watch for home ownership demand bearing in mind that especially in Prague demand is higher than availability.

And this as far as Czech nationals potential home owners.

In recent years, especially now that the Czech Republic is in the EU, Prague has continued to be one of the most attractive European cities to work and live in for the foreign work force.

In 2003 statisticians put Prague higher than Paris as far as living, cultural and economic appetability to both the foreign business worker as to the foreign tourist visitors.

 

How the Prague Real Estate Market developed

The first few years after the 1989 revolution, enterprising owners reconstructed apartments and rented them to foreign experts.

These reconstructions tended often not to be very thorough and were below western standards.

Prices rose rapidly due to the demand and limited number of suitable apartments and pivotal years were 1992 and 1993 as demand continued moving upwards while supply at any level remained comparatively low.

Prices went up even further towards the end of 1993, as renovated, western-standard housing began to hit the market and as western companies operating in Prague began competing for these newly available apartments.

For a centrally located two bedroom apartment, reconstructed to a high western standard, rental prices today can command Euro 1,800 to 2,800 per month.
This mainly in the old historical center of Prague but also in some other top residential Prague districts.

Mid level apartments in the same areas are becoming more difficult to rent as prices have yet to reflect the quality requirements, and also as the number of mid-level apartments has increased.

It is expected that the prices for these mid-level apartments, those that will not be renewed to upper standards, will go down gradually within the near future.

The Prague residential real estate market
The Prague residential real estate market can be divided into two separate and distinct categories.

The first is the Czech market which is predominated by low priced, non-western style apartments aimed mainly at Czech nationals.

The second market targets the expatriate community - people from other countries living and working in Prague - living in high priced, western finished apartments and homes.


Three price categories make up the residential market in Prague:

Low range standard housing:
The first category is in the price range of CZK 25,000 to 40,000 per square meter and this sector also has the highest percentage of occurring transactions.

This would be qualified as standard housing quality of which there is a slightly higher supply than demand.

Mid range good quality housing
The second category is in the price range of CZK 40,000 to 80,000 per square meter.

This category would be described as construction quality with good surroundings and services and in this case demand is higher, and continues to rise - than the actual supply.

50% and more of new development aims for this medium priced category.

This second category differentiates from the first mainly due to the increased appreciation in detail by the potential home buyer which it offers.

High range best located housing
This third category is in the price range of CZK 80,000 to 170,000 per square meter and location is the most important factor.

For location intended is the center or vicinity of the historical part of Prague or in prestigious residential quarters of Prague such as the Prague 5 and 6 districts.

Also Prague 2 (Vinohrady) would categorize under this qualification.

Since there are building and construction restrictions in the historical center and even in these mentioned favourable residential zones, demand far exceeds supply.

In rent terms for example - in Prague 5, CZK 300 to 330 per square meter would be the norm, so for a 2 bed roomed, 1 living room plus kitchen and bathroom of a total of say 70 square meters - the monthly rent would be around CZK 23,000 (Euro 760,00).

The targeted potential customer for this rental market would mostly be non Czech citizens such as diplomats, business managers or just plain wealthy foreigners but also some of the wealthier Czechs.

 

Potential for investors in the Prague residential market
Residential real estate development and residential investment offers good outlook to investors and developers who can provide top quality both in construction, renovation and good surrounding area for standard market prices in all three price categories but especially in the third high level category.

Overall, the steady increase in demand in all three categories, especially the potential home buyer's awareness for quality with value for money in mind will be the consistent driving force for successful development or real estate investment for the foreseeable future and like elsewhere in Western European countries - the brick and mortar value will continue to be a safe and stable investment.

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