Over the last month we have seen steady movement on the real estate market. The first quarter of 2010 has reported a decrease of 1.3% overall in property prices over the year before. Initially we had been expecting a jump in demand for real estate due to some pent-up demand being fulfilled in second quarter of 2010 but there have been a few factors which have squashed this. Let’s go through them.
- General Elections – The general elections (May 28th and 29th) have been weighing on people’s minds. Definitely it appears that there will be a change in government and perhaps by the time of your reading this there will already be a decision. Almost positively it will be a coalition.
I know readers from the UK will understand what an unsettling effect this can have because of the recent elections there. Most parties have included an increase in taxes in their policies. It is inevitable because of the current budget deficit. Because of this tax uncertainty, many businesses are putting off hiring, salary increases, etc. until they know which party will be elected. This all filters down to the consumer and has the same affect on them. We are feeling the effects of this in both the real estate and rental markets.
- Uncertainty of jobs – With unemployment at around 10% and many analysts forecasting for more layoffs in the future, most potential buyers are unsettled and would rather wait until there is a stronger feeling of security.
- Banks Holding Strict Mortgage Conditions – Our expectations had been that banks would begin easing lending conditions for both Czechs and foreigners but this has not been the case. The conditions which most banks implemented in the first half of 2009 when fear of a financial collapse was highest have been held through to present.
On a positive note, we have seen signs that the economy may be recovering at a quicker rate than initially expected. Estimated GDP growth for 2010 has been gradually increased by different organizations over the last months.
Our different offices have been working hard to meet our occupancy goals on managed flats of 93 to 97%. In Prague and Ostrava we are happy to report occupancy at 100% for flats under management. In Brno we saw a number of contracts which ended the end of April and beginning of May and so currently have an occupancy rate of around 80%. This is much below our goal and we are working hard to help this to recover. Historically this time of year has the least demand as students (estimated to be 50 000 in Brno) finish their semesters in Brno universities and all these flats come on the market.
Our ‘Gold’ power of attorney resale has proved very successful and in Brno we have been able to sell 7 flats over the last few months with about half of them being purchased by individuals without real estate agencies being involved.
For any who own property in Czech Republic and want to get an idea about the current value of their property or what it would rent for, we encourage them to download our Property Valuation form, fill it in and email it to the appropriate office for a free valuation. This is available either for current rental or sale prices.
Nathan Brown www.czechpoint101.com
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