Real estate price development in 2023

Chapters of the article

• What determines the market price of a property
• What influences the rise or fall of property prices
• When it pays to buy or sell a property
• Property price trends in 2023
• The evolution of rental prices
• Prices are falling but mortgages are rising

What determines the market price of a property

A number of factors influence the value and price of a property, including both internal and external characteristics. Here are some of the most important ones:

• Size and layout of the property: the size of the property, including the number of bedrooms and bathrooms, as well as the overall layout and functionality, can greatly affect its value. Larger and more practically designed properties are generally worth more.
• Condition and age: The condition of a property and its age also significantly affect its value. Well-maintained or recently renovated properties are worth more than those in poor condition or in need of significant repairs.
• Location: desirable locations such as proximity to schools, workplaces, public transport and amenities increase the value of a property. This is also why, for example, properties in Prague are significantly more expensive than in other areas.
• Historical and cultural significance: Properties with historical or cultural significance may have a higher value due to their unique characteristics. At the same time, however, they can pose a significant constraint due to conservation concerns.
• Environmental factors: Environmental factors such as recurring natural disasters, pollution and proximity to bodies of water affect not only the value of the property itself, but also the cost of insurance.

As this shows, a large number of factors determine the value of a property. It is therefore difficult for a layman to reliably estimate the price of his property in the real estate market. Therefore, if you are planning to sell your property, it pays to contact a professional. The same applies when assessing the market value of a property for the purposes of inheritance proceedings. You can then turn to us for the actual legal aspects of selling your property. We will provide a full contractual and legal service for you and we will handle it within 48 hours, flawlessly and professionally.

What influences the rise or fall of property prices

Prices in the property market are influenced by a wide range of factors and can fluctuate over time due to changes in supply and demand dynamics, economic conditions, government policy and other variables. These are key factors:

Factors that can increase property prices

• Strong demand: High demand for housing increases house prices. Factors such as population growth, job opportunities and lifestyle changes can contribute to increased demand.
• Low interest rates: when banks offer low interest rates, it allows more people to finance their property purchase with a mortgage. This can ultimately increase demand and push prices up.
• Limited supply: a lack of available properties can lead to high competition among buyers who are racing to see who can offer the most. This then naturally drives up prices.
• Economic growth: a strong economy associated with job creation and income growth can lead to higher house prices as people gain more purchasing power.
• Investor activity: Real estate investors, including institutional investors and individual buyers, can influence prices through their purchases and investment strategies.
• Government policy: Tax incentives, subsidies and other government policies can stimulate demand or restrict supply and affect prices.
• Infrastructure development: Investments in infrastructure, such as new highways, public transportation, or major development in an area, can increase the attractiveness of an area and thus increase real estate prices.

Factors that can reduce property prices

• Economic downturn: during an economic recession, job losses and reduced income can also reduce demand for housing and cause prices to fall.
• High interest rates: Rising interest rates increase the cost of mortgages and other loans, which then become less affordable for buyers. This in turn reduces demand and leads to lower house prices.
• High supply: if there is a surplus of available properties relative to demand, prices tend to fall due to increased competition between sellers.
• Decrease in attractiveness of a location: negative changes in an area, such as an increase in crime, deteriorating infrastructure or the disappearance of jobs, can lead to a decrease in property values and a fall in property prices on the property market.
• Tighter lending conditions: If banks tighten their lending conditions, the number of qualified buyers will decrease, pushing prices down.
• Regulatory changes: New zoning regulations or property taxes that increase the cost of home ownership can negatively reduce home prices.
• Speculative activity: If the real estate market experiences excessive speculation and price bubbles, the subsequent correction can lead to lower prices.

When it pays to buy or sell a property

The decision to buy or sell a property should be largely based on the state of the property market. Here are some key factors to consider when buying and selling:

When is it worth buying a property

• Prevailing supply: the market is at its best when supply exceeds demand. This usually leads to lower prices and more bargaining power for buyers.
• Low interest rates: Low mortgage rates can greatly benefit the purchase of a property due to lower monthly payments and the overall lower price you end up paying for the property.
• Good job market: A strong job market can be an indicator of future property appreciation and therefore a good time to buy.
• MarketTrends: study the trends and forecasts of the real estate market. Look for factors such as population growth, job opportunities and infrastructure development that can affect property values.

When it pays to sell a property

• Prevailing demand: in a situation where there is a shortage of property supply on the market, buyers are willing to pay more for a property. Therefore, it pays to wait until this time to sell.
• Property appreciation: If your property has appreciated significantly since you bought it, it could be a good time to sell before its value drops again.
• Timing: consider selling during spring or early summer, when the property market tends to be more active.
• Economic indicators: pay attention to economic indicators such as interest rates, inflation and unemployment rates. A strong economy usually leads to a healthier real estate market.

We are also noticing changes in the property market thanks to our offer of legal assistance in the case of buying or selling a property. Whenever the real estate market turns in favour of buyers, we see an increase in demand for assistance with the purchase of a property and vice versa. And if you need help, we can help you too.

Real estate price development in 2023

In the past decades, the Czech Republic has experienced a sharp rise in real estate prices – from 2013 to 2022 it was more than 120%. But the time has finally come when this growth is starting to slow down. The year 2022 brought the most significant price appreciation, while 2023 brings relatively stable property prices, mainly due to reduced demand and high mortgage rates.

However, future developments are difficult to predict as the property market is highly volatile and property prices are influenced by a number of factors. Thus, we can find completely contradictory estimates by different real estate experts and only time will tell the actual development.

Land price development

All property prices, including land, have been rising steadily over the past decade. This has changed this year. Land prices evolve according to the locality in which they are located, and likewise changes affect some localities more, while others hardly at all. For example, around Prague the price of land continues to rise, while in rural areas it tends to fall.

The most expensive land can be found in Prague, Central Bohemia and South Moravia. The cheapest land is in the Moravian-Silesian, Ústí nad Labem and Karlovy Vary regions.

Price development of flats and houses

Prices of flats have experienced more extreme changes than land prices. Last year, the price of flats fell by 8.4%. The decline in the price of flats again varied according to location. The largest declines occurred in the Liberec and Moravian-Silesian regions. The year 2023 brings again a slowdown of this price decrease and predictions of further price increases.

Development of rental prices

Unlike the purchase price of real estate, rental prices are still rising. This year, although some areas have seen growth stagnate and some areas have even seen prices fall, the situation is already returning to normal and prices are slowly rising again. One of the reasons for this is the high mortgage loans, which cost significantly more than monthly rent.

The Affordable Solicitor has also noticed this trend – more and more people are contacting us for help with renting a property. So this too is one of the consequences of high mortgage prices driving people into renting.

Theprice of renting an apartment per m2 varies considerably depending on the location. Naturally, the most expensive rents are in the capital city and the Central Bohemian Region. The cheapest rent is in the Moravian-Silesian region and the Vysočina region.

Prices are falling, but mortgages are rising

As we have already mentioned several times, the level of mortgage interest rates is closely related to the price of real estate and rentals. They have risen significantly in the last two years. Specifically, they are now the most expensive in 20 years, hovering above 6%. However, in recent months, mortgage prices have started to fall slightly and many experts agree that they could return to normal in the next two years. With cheap mortgages, however, property prices must then be expected to rise again.

The development of real estate prices in 2023 is a clear reflection of the dynamics and complexity of the real estate market. After years of steady growth, we are finally seeing the first signs of slowing and even falling prices, which has been a welcome change for those of us hoping for more affordable housing. However, the real estate market is dependent on a number of factors and developments are challenging even for seasoned analysts, so we have no choice but to hope for a brighter tomorrow.