UCB: The advantage of buying residential real estate is still almost zero


Updates: 20.06.2021 07:10
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Prague – The profitability of investments in residential real estate increased slightly in June. This follows from the indicator provided to ČTK by UniCredit Bank, the so-called Real Estate Market Tension Indicator.

“The advantage of buying residential real estate has been declining for a long time, and in April the UniCredit Real Estate Tension Indicator fell below zero after seven years. “said UniCredit Bank analyst Jiří Pour.

Gross annual rental income remained at 3.91 percent, and after taking into account the assumed fixed rate of wear (two percent), the estimated net annual return was 1.91 percent. The rise in mortgage rates disadvantages the purchase of an apartment from the point of view of people with a mortgage; real estate remains an interesting investment opportunity for savers due to low government bond yields.

“In the future, we expect a gradual increase in government bond yields and mortgage rates, which should push the tension indicator back below zero and act to slow down the growth of real estate prices in the Czech Republic,” Pour estimated.

However, according to him, relatively high rents due to prices combined with low interest rates will continue to feed demand for real estate in Ostrava, Ústí nad Labem, Jihlava and Pardubice. On the other hand, the purchase of an apartment in Prague, Brno and Zlín is already disadvantageous for investors on average, he added.

UniCredit’s indicator of tension in the real estate market shows the extent to which Czech real estate is attractive to investors. The more attractive investments in Czech real estate are, the more the increased demand pushes prices up.

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