Czech Republic holds the most stable position in the European real estate market
This statement was spoken at the seminar on the Czech real estate market, which was organised by CPP Development who is the developer of a luxurious residential project, Central Park Prague. The seminar was conducted by Erik Webb Dempsey, partner of a property expert company, Property in Prague. Mr. Dempsey has been operating in the Czech real estate environment for more than 15 year.
“The Czech Republic remains very attractive for the real estate business. Its strong economy has caused the country to have one of the strongest positions in the European real estate market,” stated Erik Dempsey.
In his opinion this success is due to many reasons. First, the strengthening of Czech crown, then the increased buying power of the countries population, a low (only five per cent) unemployment rate (the lowest since 1997) and still one of the lowest mortgage interest in Europe. Currently the property owned by Czechs represents approximately 35 % of the EU average; however one can expect we will soon catch up with countries like Austria or Finland. “Economic stability is indicated by, besides other reasons, the fact that at the moment the country has 17,000 dollar-millionaires and every year their number increases by 15 per cent,” declares Mr. Dempsey. Then the Czech capital city has a very good geographical position in Europe. The GDP per inhabitant in Prague is twice as high as the average in the Czech Republic. Prague is the eighth most expensive city in Europe and it ranks among the twelve European regions with the highest buying power.
According to Mr. Dempsey the domestic real estate market has been set in motion especially by the current, relatively low interest rates of mortgage loans. “More than three quarters of Czechs have or intend to get a mortgage. The majority of borrowers are those employed with a higher education. Nevertheless the indebtedness of Czech households is still quite low compared to Western Europe.”
Erik Dempsey even did not avoid the question of the mortgage crisis in the USA, i.e. the environment he is closely acquainted with. “Crisis overseas will neither negatively influence nor endanger the Czech banking and real estate sector; more to the contrary. Banks are making their rules and conditions for individual loans much stricter in order to prevent exactly the situation that occurred in the United States and Great Britain,” says Mr. Dempsey.
Mr. Dempsey´s comment on the saturation of the Czech real estate market is clear. No “price bubble” will burst in the Czech Republic within the foreseeable period: “The ratio between the incomes of population and the real estate prices remains well balanced and the accessibility of mortgage services, despite the continuous interest increase, remains strong. In the first half of 2008 the prices of apartments rose by 5.6 %, in Prague by 4 %.”
According to Mr. Dempsey the Czech real estate market still lacks sufficient amounts of luxurious real estate. There will be a tendency to expand the average size of an apartment, as the existing one – 76 m2 – is below the EU average. Out of the Prague locations like the districts of Prague 7, Prague 8 and Prague 3 show the highest growth potential. From a regional perspective the cities like Ostrava, Liberec, Olomouc, České Budějovice and Brno, which recorded the highest growth in the last 4 years, 
have the best chances.
