How is coronavirus affecting Prague’s real estate market?

01-04-2020

The travel ban instituted due to the ongoing coronavirus epidemic has had an effect on the prices of rent within Prague, with some owners of Airbnb properties offering their flats for long-term rent instead. A wider impact on property prices is also possible, some experts say. In order to stimulate the housing market, the finance minister has proposed the cancellation of the real estate transfer tax.

Photo: Khalil Baalbaki / Czech RadioPhoto: Khalil Baalbaki / Czech Radio As the famous Prague focused YouTuber Janek Rubeš from Honest Guide recently wrote on his blog, the coronavirus epidemic has not just left the Czech capital’s streets empty – it has had the same effect on many Airbnb apartments. Prices have gone down to 15-year lows with the ongoing travel ban in place.

This was confirmed to Czech Radio by the president of the Association of Real Estate Companies Jaroslav Novotný.

"Airbnb is dead right now, because no one is traveling. There is no short-term renting going on, only in exceptional cases. This has also shown itself on the market where we can see owners of Airbnb flats putting them up for long-term rent."

The decrease in rents is likely to continue for months, he said, before related elements of the market, especially tourism associated-businesses are back in full swing.

However, the coronavirus could also have an impact on house and flat prices themselves, Mr Novotný said.

"It could happen. Of course, we do not know how long the coronavirus crisis will go on, but if it does continue for months, then I am certain that we will see a movement in prices within a quarter year or five months."

Real estate experts are unwilling to speculate on the exact level of impact that the COVID-19 epidemic is likely to have. The general consensus seems to be that the longer the crisis lasts, the bigger the ultimate effect on prices.

On the other hand, some say that there will only be a slowing effect, with continued growth almost certain in the end. Landlords focused on Airbnb will likely return to that form of short-term letting as soon as the crisis dissipates.

To stimulate the housing market, Finance Minister Alena Schillerová is proposing the cancellation of the real estate transfer tax. Currently, buyers are required to pay a tax amounting to 4 percent of the total purchase cost to the state within three months of buying the property.

Alena Schillerová, photo: ČTK/Kateřina ŠulováAlena Schillerová, photo: ČTK/Kateřina Šulová Ms Schillerová described the details of her proposal last week.

"This tax always had an impact of around CZK 13-14 billion annually. What better time to institute this change than now? We also have to ask when we are going to put this change through, because if we announce a date the market will just shut down with everyone waiting for the tax to finish. Therefore we would also institute it retroactively.

"I'll be honest. The idea is that those who have already paid the tax would get a cut on mortgage payments. Those who will no longer have to pay the real estate transfer tax will not get these rebates."

The government is set to discuss the steps on Wednesday and the finance minister says that, if approved, she would like the legislation to go into effect as soon as possible. What she did stress is that the cancellation of the real estate transfer tax would be a long-term arrangement, going beyond the coronavirus crisis.

01-04-2020