Prague - The prices of flats in prefab buildings are now as much as 20% lower on average than they were a year ago. Property prices in general have dropped by an average of 10-15%. People are less interested in buying their own homes, while demand for rentals is rising, according to the latest data from the real estate portal bezrealitky.cz. The data are based on the end prices of properties sold.

"The fall started in last year's final quarter, when prices peaked in most regional cities," said Jakub Havrlant, head of the website. Prices grew until last autumn, with growth reaching as much as 30% in Plzeň, Ostrava, Ústí nad Labem and Teplice, for instance. "The market was showing a certain inertia and resisted the global property crisis," he said. "One of the reasons was that prices here were not as overestimated as they were in other countries."

Gap getting wider

In recent months, the gap has gotten wider among different localities and individual properties. "The market is more sensitive, and people choose more carefully what they buy. They are interested more than before, for instance, in what developments are planned in the broader vicinity of a given property," Havrlant said. "Fortunately, the time when it was possible to ask for high sums of money for apparently poor-quality housing is over," he added.

The price decline is most apparent in localities and properties with some "hitch". It might be a "nonpromising" location or a bad view, but good transport accessibility is also increasingly important. In Prague's surroundings, ithat involves especially fast train connections to the centre: That is why properties for instance in Říčany, Úvaly, Český Brod, Beroun, Kralupy nad Vltavou and Čelákovice sell very well.

Havrlant said that the number of "speculative" purchases of properties has decreased as well. "Clients who just wanted to lease out a property and did not plan to live there themselves did not care about the locality so much," he added. By contrast, Bohdan Suchánek, marketing director at mortgage bank Hypoteční banka, does not agree. "The decline has come mainly because demand is decreasing already from the large group of people born in the 1970s," he said.

Suchánek regards the drop in prices as a return to normal. "There was not any property bubble in the Czech Republic," he said. "After 20 years of constant growth, a moderate decline has come."

Stagnation to come

The biggest drop in prices was recorded for old flats in prefab houses. For example a three-room flat with kitchen in Prague's Jižní Město housing estate sold at CZK 3.5 million a year ago, but its average price this year is CZK 2.7 million. The overestimated prices of prefab flats in Brno have dropped 20%, with a three-room flat now for as little as CZK 1.7 million.

"We suppose that average prices will stagnate," Havrlant said. One of the few towns where average market prices will grow slightly this year is České Budějovice and possibly in Ústí nad Labem, as well.

While the prices of lower-quality properties may still keep on falling, those of new and better-quality projects will rise. "Prices of flats in new buildings in attractive localities have remained unchanged or even increased a bit against last year," Havrlant said. But people are starting to distinguish to a greater extent even among new projects. The standard that clients expect includes a balcony, a basement, storage space such as a walk-in wardrobe or storeroom, and a parking lot. Also important is an attractive location with services available.

Demand rising for rented homes

The market for rentals in Prague has increased 5% over the last year, and Ostrava recorded a 10% growth. Decreased access to mortgages is one of the factors behind this.