Fears that a bubble was growing in the Central European real estate sector appear to have been averted, as growth in residential property prices has started to slow across much of the region.
Prices are still growing fast, with the growth in several Central European countries outstripping that in
However, reports from several markets in the region since then indicate a slowing of growth and expectations of a further easing in future.
Knight Frank, which uses different methodology from Eurostat, puts the
“More countries and territories are seeing price rises year-on-year than at any time in the last decade but the average rate of growth is slowing significantly as global uncertainty impacts,” commented Knight Frank on releasing its latest index that has seen a slowdown in annual growth for six consecutive quarters.
“In Europe, slower growth is a common theme but some interesting trends stand out … Central and Eastern European countries continue to perform strongly – The
Fast growth, demographics and Airbnb
A combination of factors have been causing prices to rise. The economies of the region have been growing fast, in general outstripping the eurozone average in the last couple of years. While they are experiencing some slowdown as a result of the slowing of key European economies in particular
Demographics have a mixed impact. Overall, populations are declining in most countries in the region, with mass emigration leaving abandoned homes and villages in rural areas. Yet major cities are booming amid the ongoing migration to urban areas and the growth of industries such as IT and tech. And when emigres do choose to put money back into their home economies, residential real estate is a popular way to do this. Residential real estate as an investment is becoming popular for locals as well.
Then there is the booming tourist industry in cities like
Economists from the
In recent years, “A lot of private investment was directed not into proactive capacity, but into real estate markets,” said wiiw economists during a webinar in November. “Practically everywhere [in
“Is this a bubble? Yes, but we don’t think it will burst tomorrow or the day after tomorrow.”
Double-digit growth in
House prices continued to rise in double digits in 1H19 in
In
The demand side of the housing market is supported by high employment, expanding real incomes, high level of savings and the low interest rate environment, according to the MNB, as reported by bne IntelliNews. The central bank warned of a steep drop in supply from 2020-2021 due to strong cost-side pressure and a change in the VAT rules effective from
An
In its biannual Financial Stability Report released on
However, the MNB said the launch of the new MAP+ retail bond could cool demand for residential property for investment purchases in the capital. About 40% of home buyers in the capital buy for investment purposes, according to market surveys. Elsewhere in the country, the rate is around 25%.
Peaking in
Prices in the
“Despite some slowdown from the 13% peak seen in 2017, Czech property price growth has remained solidly above the EU28 average growth of 4.4%,” said
He added, “Asking prices in 3Q19 signal that real estate price growth will very likely slow in the months/quarters ahead. This is not only because of the CNB measures but also because of the generally high level of property prices relative to household income following rapid growth in the last four years (40% increase since 2Q 2015).”
Bijou markets
Several of the smaller CEE countries have also been among those with the fastest rising prices in the last couple of years.
In neighbouring
Bankers surveyed by the
A statement issued by the central bank in November says that while "the RE market shows no evident signs of overheating, it is essential not to ignore potential risks, especially in cases where housing purchased for investment purposes is acquired with borrowed funds”. This is partly fuelled by the increasing number of properties bought to rent out, including for short term holiday lets, in major cities
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