Czech Building Permits: Record Drop Forecasted

For the whole of last year, building authorities issued 61,613 permits throughout the Czech Republic. About 10,500 less year-on-year. Compared to 2021, when the number of stamps issued last increased, the drop is approximately one-third.

“The reason was probably to a large extent problems with the digitalization of construction management. However, this is not just a one-time fluctuation, but an overall negative trend,” said Martin Gürtler, economist at Komerční banka.

The main problem is the construction of apartments. Last year, developers and ordinary people started building 35,819 of them. In Prague, where, according to estimates, between 10 and 15 thousand apartments would need to be built to satisfy demand, 7,380 of them started to be built last year.

Slow permitting is one of the main reasons for skyrocketing property prices. Waiting at the authorities makes construction more expensive. At the same time, it allows sellers to pass on increased costs to buyers. It creates an insufficient offer on the market. So people have less choice and take what is available. Even at increased prices.

Offer prices, i.e. those listed in advertisements, last year according to the website Sreality.cz increased by 15.6 percent year-on-year. Sreality is looking at medium-sized apartments of 50 to 80 square meters. In their case, in practice it is a price increase in the order of hundreds of thousands of crowns, in Prague even over a million.

According to experts, only more apartments built can change this. In this respect, however, the outlook for this year does not offer optimism. “When it comes to housing construction, we cannot expect a boom,” stated Petr Dufek, chief economist of Banka Creditas.

The Czech Republic will begin to catch up with the low number of issued building permits in the coming months, also because developers will gradually use up the supply of projects for which they have already received stamps. Some buildings were already approved at the time of the covid pandemic, but due to uncertainty in the market, developers waited to build them. As this delayed supply of apartments fades, that will add further pressure on prices.

“The situation could only improve after 2027 in connection with the planned amendments to the new Building Act and the Metropolitan Plan,” said Petr Michálek, chairman of the board of the developer Skanska Residential.

The problem is exacerbated by the fact that even in the previous two decades, construction was not sufficient. For example, according to the data of the developer Central Group, which has been following the development of the market for a long time, the housing deficit in the capital has grown by almost one hundred thousand apartments over the past twenty years.

On the contrary, interest in apartments is growing. A total of 7,800 apartments were sold in Prague from January to December. Sales thus surpassed the record year 2021.

Great demand was also seen in Brno. According to data from developer Trikay, people bought 1,405 new apartments there in the past 12 months. It was the largest number since 2016, when sellers listed 86 more apartments.