Coronavirus: Sale of Residential Properties

1. What effect is coronavirus having on the residential real estate market?

Following the coronavirus pandemic in the Czech Republic, the market has generally slowed down. First came the general shock of quarantine and the state-imposed curfew measures, which naturally lead to decreased interest in property inspections. Then various other forms of governmental impetus further supported the stagnation of the market. Both buyers and sellers began to play a waiting game. Only now, at the turn of May and June, has the market started moving again. It is not yet possible to definitively determine the impact of the whole situation on future sales. I assume that although the measures are now gradually being relaxed and some conditions are currently more favorable to buyers than they were before the crisis, purchasing power will be weaker and banking institutions will be more cautious in their transactions. The real estate market is now also being influenced by the planned abolition of the real estate acquisition tax (4% of the total purchase price) as well as by the abolition of tax deductions on interest payments for all new mortgages (i.e. 15% of the tax base). The disappearance of the 4% tax would be particularly beneficial to buyers paying for investments out of their own resources. It is important to note that these changes have not yet affected Prague sales prices. In the case of the several sales that have taken place despite the lockdown, it would be fair to say that the seller truly needed to make the sale as soon as possible.

2. What are the most common questions now being asked by owners / clients?

Although coronavirus has had a profound effect on our daily lives, and has given rise to many questions that are really changing the world, client questions regarding real estate have not radically changed.

• How will the market continue to develop? Does it make sense to sell real estate now? What will be the development of real estate prices?

There are no clear answer to these questions at the moment. Every client, every property, every case is unique, just as is the real estate consultant to whom these questions are posed. I without a doubt recommend an individual approach. We have a thorough overview and understanding of the sources and information regarding the momentary state of the market, and this knowledge allows us to create an individualized advice to each client and their circumstances. But as a general rule, if the client’s current life situation requires it, it is always the right time to sell. Nobody knows for certain what future developments in real estate prices await us, it is really difficult to predict such things even for those of us with experience and who are engaged in the business on a daily basis.

3. What is the current situation in the residential real estate market?

As I mentioned in the introduction, the market is starting to move again. Clients have market estimates for their properties, yet they are more careful in deciding whether it is a good time to sell. It is difficult to estimate what the economic impact of the whole situation on the real estate market is going to be. Over time, prices can go down, but also up. I do not want to be pessimistic, but my opinion is that purchasing power will go down. On the other hand, I still believe that investing in real estate is a good decision, perhaps more so than ever in these uncertain times. In addition, the Czech Republic is coping successfully with the coronavirus pandemic so far - I believe that it will attract more foreigners. Prague has always been a great attraction, and it is possible that it’s good “corona” status will further strengthen the favorable impression it has always made.

4. What developments can be expected by the end of 2020, and where do you see possible opportunities?

I believe that there will be some shift in buyer’s target of interest. I estimate that there will be more interest in houses with a garden and apartments with terraces. Interest in weekend cottages is already starting to increase, but cottages are not our market segment. While economic developments will certainly play a decisive role in the trends in the real estate market, I can say that at the moment there is, and will continue to be, interest in real estate in Prague: the shortage of available space has not changed with the corona crisis.

Michal Kniha

Team Leader Residential Sales

Team Leader Commercial Rentals

E-mail: michal.kniha@engelvoelkers.com

Tel.: +420 233 091 011