buildings

Article
Impacts of Crisis on the Real Estate Market Depending
on the Development of the Region
Eduard Hromada 1, * , Renáta Schneiderová Heralová 1 , Klára Čermáková 2 , Marian Piecha 2
and Božena Kadeřábková 2

1 Faculty of Civil Engineering, Czech Technical University in Prague, Thakurova 7,

166 29 Prague, Czech Republic
2 CEVRO Institut, Jungmannova 28/17, 110 00 Prague, Czech Republic
* Correspondence: eduard.hromada@fsv.cvut.cz; Tel.: +420-224-353-720

Abstract: The article compares the effects of crisis on the real estate market in two regions of the
Czech Republic that differ from a macroeconomic point of view. The region of Prague represents the
rich and developed region while the Karlovy Vary region struggles with many socio-economic and
structural problems. An analysis was performed for the time period of 2018 to 2022. It analyzed the
development of apartment prices in both regions, the availability of housing, the turnover of the real
estate market in terms of the number of apartment sales, the development of liens on real estate, the
number of apartment transfers from state property to private ownership, and the development of
the number of real estate foreclosures. The basis for creating statistical outputs is the EVAL software,
which was developed by one of the co-authors of this article. The EVAL software collects price offers
of apartments offered for sale and rent throughout the Czech Republic and collects publicly available
data from the cadastral office. The authors found that the real estate market experienced a significant
turnaround in the volume of mortgage loans granted in 2022. This decline led to a significant drop
in the total volume of real estate transactions. The findings suggest that potential buyers should
wait for property prices to drop before buying, while rental property owners and investors can take
advantage of the increased demand for properties.

Keywords: real estate; investing; availability of housing; ownership changes; cadastral data
Citation: Hromada, E.; Heralová,
R.S.; Čermáková, K.; Piecha, M.;
Kadeřábková, B. Impacts of Crisis on
the Real Estate Market Depending on 1. Introduction
the Development of the Region.
Due to the specificity of properties being a category of economic goods, the property
Buildings 2023, 13, 896. https://
market exhibits a high potential for disequilibria. Property price fluctuates around the
doi.org/10.3390/buildings13040896
reproduction value of the property rather than tending to a neoclassical equilibrium. The
Academic Editor: Chyi Lin Lee COVID-19 pandemic and the war in Ukraine shocked the property market both on the
Received: 2 March 2023
demand and on the supply side through various impulses—fiscal spending [1], changes
Revised: 24 March 2023
in the labor market [2], lockdowns and breakdowns of construction [3,4], the outflow of
Accepted: 27 March 2023
construction workers [5], new immigrants [6], and last, but not least, inflationary pressures
Published: 29 March 2023 and decreased housing affordability [7] urging the need for social housing [8]. In the case
of the Czech Republic we can observe also the impact of monetary policy shocking the
property market. Monetary policy, being very loose during the COVID pandemic [9],
boosted demand for properties. Subsequent monetary tightening barely froze the property
Copyright: © 2023 by the authors. market [10]. The price of properties, in reaction to the mentioned shocks, has seen a truly
Licensee MDPI, Basel, Switzerland. dynamic development, remarkably differing across regions. In our paper we show that
This article is an open access article
the magnitude of the fluctuation of the price cycle tends to be higher in regions with cheap
distributed under the terms and
properties, meaning simply that properties of higher value lose their value in “bad times”
conditions of the Creative Commons
more slowly and mildly compared to “low end” properties. The downward rigidity of
Attribution (CC BY) license (https://
prices is especially more observable for more expensive properties. This can be attributed to
creativecommons.org/licenses/by/
a range of factors, including the desirability of properties in higher-end areas, the relatively
4.0/).

Buildings 2023, 13, 896. https://doi.org/10.3390/buildings13040896 https://www.mdpi.com/journal/buildings

Buildings 2023, 13, 896 2 of 15

stable financial position of owners of these properties, and the ability of these owners to
wait for better market conditions to sell their properties.
On the other hand, properties in lower-end areas tend to be more susceptible to market
fluctuations, as their owners may be more likely to be financially vulnerable, and may need
to sell their properties quickly to meet their financial obligations. As a result, properties in
these areas may experience more significant price fluctuations in response to changes in
market conditions.
Overall, the research suggests that the property market is highly susceptible to dis-
equilibrium, and that the value of properties is subject to significant swings in response
to changes in market conditions. With the aim to confirm this hypothesis, we offer a
comparative analysis of property price development in two regions of the Czech Republic
that fit best to the mentioned scheme—two economically and structurally different regions
in the Czech Republic in terms of the impact of crisis on the real estate market. These
are the Prague region and the Karlovy Vary region. We selected these regions because
one—belonging to one country the property market faces the same historical, regulatory,
monetary, fiscal, and other policy environment, and two—because these two regions rep-
resent the “high end” and the “low end” in the price scale on the Czech property market.
The property price differences mainly reflect the economic and structural characteristics
described below:
The prague region fulfills the role of a natural center of politics, international relations,
education, culture, and economy. Prague is also an important city in Central Europe.
Prague is the largest city and at the same time the capital of the Czech Republic. It covers
an area of 496 km2 . The central location and attractiveness within the Czech Republic and
Europe predestined Prague to the role of not only an important travel destination, but also
a crossing point for a number of important transit routes [11].
Prague is characterized by a high number of people who commute to Prague for work,
using a developed transport infrastructure [12]. The attractiveness for foreign entrepreneurs
and multinational companies also contributes to the wealth of the region. In the next period,
an increase in the number of residents can be expected, mainly due to job opportunities
and people moving for work.
The Karlovy Vary region is located in the west of the Czech Republic. The region
consists of three districts—Cheb district, Karlovy Vary district, and Sokolov district, and
there are a total of 134 municipalities. With its area (3310 km2 ), the Karlovy Vary region
ranks among the smallest regions in the Czech Republic. One of the most important
industries in the Karlovy Vary region is the spa industry [13].
The Karlovy Vary region is currently struggling with population decline and a whole
range of structural problems. The Karlovy Vary region will be one of the most affected
regions in terms of the European Union’s move away from heavy industry. Massive subsidy
support from the European Union is planned for the Karlovy Vary region, which is to
ensure the transition from heavy industry to industry using renewable energy sources.
Despite the significant support here, it can be expected that there will be a significant
decrease in job opportunities in the entire region and that many people will leave the region
for better earnings in other regions. Table 1 shows a comparison of basic statistical data for
both regions. Figure 1 marks the investigated regions on the map of the Czech Republic.
The study aims to identify the reasons for differences in price dynamics and rigidities
of different properties in the market. To achieve this goal, the study offers an in-depth
analysis of the property market from an economic point of view.
By understanding these factors, the study seeks to provide valuable insights into the
workings of the property market and the reasons why prices may fluctuate differently across
different types of properties. For example, the study may shed light on why properties in
certain locations or of a certain quality may experience less price volatility compared to
others, or why certain properties may be more resistant to changes in market conditions.
Buildings 2023, 13, 896 3 of 15

Table 1. Comparison of basic statistical data for both regions [14,15].

Statistical Parameter Prague Region Karlovy Vary Region

Population (December 2022) 1,281,219 persons (+0.5%) 282,514 persons (−0.2%)
Average gross salary (December 2022) 48,848 CZK/month (+6.7%) 34,107 CZK/month (+5.5%)
Share of unemployed persons
3.04% (+0.01%) 3.8% (−0.4%)
(per population aged 15–64) (8 December 2022)
Number of building permits
2277 (−4.9%) 1726 (−7.0%)
(Q1–Q3 2022)
Apartments launched (Q1–Q3 2022) 4251 (−35.4%) 727 (−2.7%)
Completed apartments (Q1–Q3 2022) 4634 (+25.8%) 533 (+31.3%)
Number of guests in mass accommodation
Buildings 4,212,645 (+208.3%) 877,742 (+78.0%)
facilities2023, 13, x 2022)
(Q1–Q3 FOR PEER REVIEW 3 of 16

Note: Values in parentheses represent growth/decrease from the previous year.

Figure1.
Figure 1. Marking
Markingof ofthe
theinvestigated regions
investigated onon
regions thethe
map of the
map of Czech Republic.
the Czech Data source:
Republic. Avail-
Data source:
able online: https://www.wikimedia.org/ (accessed on 14 March 2023).
Available online: https://www.wikimedia.org/ (accessed on 14 March 2023).

Table 1. Comparison
Moreover, of basicmay
the study statistical
providedatavaluable
for both regions [14,15].
insights for property owners, investors,
and policymakers,
Statisticalwho need to understand the
Parameter dynamics
Prague of the property
Region market
Karlovy Vary to make
Region
informed decisions. By understanding the underlying economic factors that affect the
1,281,219 persons 282,514 persons
Population
property (December
market, 2022)
these stakeholders can better anticipate changes in property values, plan
(+0.5%) (−0.2%)
their investment strategies, and formulate policies that promote stability and growth in
48,848 CZK/month 34,107 CZK/month
the market.
Average gross salary (December 2022)
In summary, the study offers a comprehensive (+6.7%) (+5.5%)
analysis of the property market from
Share of unemployed persons
an economic perspective, with the aim of providing a better understanding of the factors
(peraffect
that population aged 15–64)
price dynamics (8 Decem-
and 3.04% (+0.01%)
rigidities of different 3.8% The
types of properties. (−0.4%)
insights
ber 2022)by the study can be valuable for a wide range of stakeholders and can inform
provided
decision-making
Number of building processes in the property market.
permits
2277 (−4.9%) 1726 (−7.0%)
In our
(Q1–Q3 2022)study, we defined the following research questions:
1.Apartments
How haslaunched (Q1–Q3
the significant 2022) in the Czech
turnover 4251 (−35.4%) 727
Republic’s real estate (−2.7%)
market in 2022
impacted the overall economy
Completed apartments (Q1–Q3 2022) and housing affordability?
4634 (+25.8%) 533 (+31.3%)
2.Number
To what extentinhas
of guests masstheaccommo-
increase in mortgage prices influenced the decline in new
mortgages 4,212,645 (+208.3%) 877,742 (+78.0%)
dation facilitiesand completed
(Q1–Q3 2022) real estate transactions?
Note: Values in parentheses represent growth/decrease from the previous year.

The study aims to identify the reasons for differences in price dynamics and rigidities
of different properties in the market. To achieve this goal, the study offers an in-depth
analysis of the property market from an economic point of view.
Buildings 2023, 13, 896 4 of 15

3. How do the price cycles and recovery rates in the property market differ between
poorer regions, such as the Karlovy Vary region, and more affluent regions, such
as Prague?
4. What role has the war in Ukraine played in the increasing demand for rental properties
in the Czech Republic, and how might this affect the long-term housing market?
5. How will the anticipated deterioration of the macroeconomic situation impact the avail-
ability of owner-occupied and rental housing in different regions of the Czech Republic?

2. Literature Review
The specific characteristics of properties make the property market particularly suscep-
tible to disequilibrium. Unlike other goods, properties have unique features that make them
difficult to compare with other goods in the market. Properties have a fixed location, size,
and other intrinsic characteristics that cannot be easily replicated or duplicated. This lack of
comparability makes it difficult to achieve a neoclassical equilibrium in the property market.
Case [16] argues that the arbitrage on the property market is costly as property acquisition
is connected to the transaction and maintenance costs and tax burden. Gilber [17] adds that
risk aversion, high value, and low liquidity of properties compared to other investments
make the property reservation price highly specific and differing for each buyer. Real estate
is seen as the best store of value in times of high inflation [18], volatile markets [19], and
insufficient pension system [20], as properties, attract investors under uncertainty at stock
markets, as well as for diversification purposes [21]. In this regard, the decision to buy a
property is made independently of the potential profit from its rental. This is an important
feature for understanding property price formation as property price is less dependent on
its yield than financial assets [22]. Property prices will increase all the time, and investors
believe in their future continuous increase. An inertial trend of property prices has been
confirmed by Case or Leinberger [23,24]. All the mentioned factors may induce a biased
perception of property price by the buyer which, in combination with the inelastic supply
of new properties, stands behind property price fluctuation during the property price
cycle, thus property prices tend to fluctuate around the reproduction value of the property,
which is the cost of replacing the property with a similar one. This reproduction value is
influenced by a range of factors, such as the cost of construction, land prices, and other
factors that influence the cost of replacing the property. As a result, property prices are
subject to significant swings in response to changes in market conditions.
Vast research has been published exploring fluctuations of property prices and prop-
erty market rigidities in relation to the affordability of housing, a contentious issue of
current policy debates. Cetin and Yildirim [25] examined the determinants of house prices
and their effect on housing affordability. The authors found that factors such as income,
mortgage interest rates, and macroeconomic indicators have a significant impact on housing
affordability, and that measures such as subsidies and tax exemptions can help to improve
affordability. Zeng and Liu [26] analyzed the relationship between housing prices and
economic growth in China. The authors found that housing prices are positively related
to economic growth, and that measures such as increased housing supply and improved
access to mortgage credit can help to address housing affordability issues. Oyekale and
Alamu [27] explored the affordability of rental housing. The authors found that rental hous-
ing is unaffordable for many households, particularly those with lower incomes, and that
government policies such as subsidies and rent control can help to improve affordability.
Gholizadeh and Zare [28] examined the relationship between apartment prices and urban
development. The authors found that factors such as population growth and urbanization
contributed to increases in apartment prices, and that measures such as improved urban
planning and increased housing supply can help to address affordability issues. A study by
Natarajan et al. [29] explored the impact of COVID-19 on the rental housing market. The
authors found that the pandemic led to decreased demand for rental housing, particularly
in urban areas, and that measures such as rent subsidies and eviction moratoriums can
help to address affordability issues.
Buildings 2023, 13, 896 5 of 15

Stec, Grzebyk and Pierścieniak [30] highlight the importance of understanding socio-
economic development in EU countries, which has direct implications for the real estate
market. By examining factors such as demographic and labor market potentials, economic,
social, and technical potentials, the authors provide insights that can help assess the
dynamics and performance of the real estate market in these countries.
Within this broader context, we expect the cheaper property segment and region
with lower property prices to suffer from depressed demand more severely; these price
cycle fluctuations will happen with greater magnitude. We expect to find also a greater
downward rigidity of prices in the high-priced region. The analysis to follow uses primary
data for testing the mentioned hypothesis.
We managed to find several articles that deal with real estate market research at the
regional level. For example, Bangura and Lee [31] explore house price linkages between
Greater Sydney and coastal cities in NSW, Australia, finding strong connections with the
Illawarra region but not the Hunter region. The results highlight the importance of spatial
connectivity and migration patterns in shaping regional housing markets, with potential
policy implications for addressing imbalances between growth areas. Yoshida and Kato [32]
investigate housing affordability in Osaka Prefecture, Japan, finding that both the quantity
and quality of affordable private rental apartments for multiple households are problem-
atic, with a decline in the role of old wooden low-rent housing and limited availability
of larger units for low-income groups. Bangura and Lee [33] examine homeownership
affordability determinants in Greater Sydney using LGA data, finding that while house
price and median personal income are key drivers across all regions, Western Sydney is
more sensitive to these factors and additional determinants, emphasizing the importance of
submarket analysis. Bin, Gardiner and Liu [34] propose a regional house price mining and
forecasting (RHPMF) framework to analyze the spatial distribution and temporal evolution
of urban real estate markets, using context-aware matrix factorization and demonstrating
its effectiveness through case studies in Virginia Beach, Philadelphia, and Los Angeles.
Ploessl and Just [35] examine the relationship between news coverage and sentiment and
residential real estate prices in Germany at a regional level, finding that news-based indica-
tors significantly impact prices and can lead them up to two quarters, potentially reflecting
investor sentiment, and demonstrating the value of quantifying qualitative data from texts.

3. Materials and Methods

In the following text, figures based on source data from the EVAL software are dis-
played. The EVAL software collects data from real estate advertising from the entire Czech
Republic. Data collection is carried out regularly in a period of once a month since 2007.
Data on apartments for sale and apartments for rent are recorded. All recorded data is
checked for data reliability. The EVAL software also collects data on changes made in
Cadaster of Real Estate. Cadaster of Real Estate of the Czech Republic is a set of data
about real estate in the Czech Republic, including their inventory and description and
their geometric specification and position. Parts of it are records of property and other
material rights and other legally stipulated rights to these real estates. Cadaster of real
estate contains many important data about parcels and selected buildings and their owners.
It is thus possible to identify increases or decreases in real estate transactions anywhere in
the Czech Republic. Various statistical outputs can be generated from the obtained data.
The EVAL software was developed by one of the co-authors of this article in 2007.
Since then, it has gone through many updates. This is specialized software used at CTU in
Prague. This software is not available for general use to other potential customers. There
are also no plans to offer this software to the general professional public. More detailed
information about the functioning of the EVAL software can be found in older articles by
the co-authors of this article.
The Czech Republic offers its citizens various types of housing, from apartments to
family houses. The most widespread type of housing in the Czech Republic is apartments,
which are often found in large cities and urban areas. These apartments can range in size
Buildings 2023, 13, 896 6 of 15

from small studio apartments to large multi-bedroom units. Another popular type of hous-
ing is townhouses, which are often found in suburban areas and represent a middle ground
between apartments and single-family homes. Single-family homes are also available in
the Czech Republic but are usually more expensive and often found in rural areas. This
article analyzes flats and apartments in all cities and towns in the Karlovy Vary Region and
the Prague Region.
The EVAL software is structured into several sub-modules that work together:
• Internet link collection module.
• Module for downloading full text of advertisements and exporting data.
• Module for filtering data.
• Module for data evaluation.

3.1. Internet Link Collection Module

This part of the software tool systematically crawls the real estate internet servers and
records current internet links to real estate sales or rental offers in the database.

3.2. Module for Downloading Full Text of Advertisements and Exporting Data
This part of the EVAL software has the task of automatically downloading the full
text of the advert by machine and exporting data from the text of the recorded adverts
to enable further statistical evaluation of the development of the real estate market. For
each property category under study, a custom data structure has been defined, which is
exported/retrieved from the texts of the recorded advertisements.

3.3. Module for Filtering Data

The database files created by the Module for downloading the full text of advertise-
ments and exporting data are then analyzed for data veracity. Each recorded quote is thus
assessed in terms of objectivity and correctness of the presented information, completeness
of the presented information, etc. In the event of irregularities being detected, the bid under
consideration is excluded from further statistical processing.

3.4. Module for Data Evaluation

This part of the EVAL software creates source documents for the creation of statisti-
cal reports describing the development of the real estate market according to the user’s
requirements. The time evolution and dependencies between many monitored real estate
parameters are examined.

4. Results and Discussion

4.1. Availability of Owner-Occupied Housing
Figures 2 and 3 show the differences in the availability of owner-occupied housing in
the Prague region and the Karlovy Vary region. The blue columns show the median offer
price for one square meter of the apartment’s floor area. There are significant differences in
the price level between the Prague region and the Karlovy Vary region. This is due, among
other things, to significantly better job opportunities in Prague and the wider availability
of services. During the years 2017 to 2022, there was a significant increase in the price level
in both regions, reflecting the trend of overall property appreciation across Europe.
Property price appreciation in Prague has been observed to a larger extent, in nominal
and also in relative terms. The values in the white box show how many years are needed
to save for an older average apartment with a floor area of 70 square meters. At the same
time, additional entry costs of CZK 350,000 are expected, which will be used to put the
apartment into proper use. The calculation also includes the average wages in both regions
for individual years, which were taken from the data of the Czech Statistical Office. It is
assumed that the entire earnings will be used to pay off the apartment.
 Property price appreciation in Prague has been observed to a larger extent, in nomi-
nal and
nal and also
also in
in relative
relative terms.
terms. The
The values
values in
in the
the white
white box
box show
show howhow many
many years
years are
are
needed to save for an older average apartment with a floor area of 70 square
needed to save for an older average apartment with a floor area of 70 square meters. At meters. At
the same time, additional entry costs of CZK 350,000 are expected, which will
the same time, additional entry costs of CZK 350,000 are expected, which will be used to be used to
put the
put the apartment
apartment intointo proper
proper use.
use. The
The calculation
calculation also
also includes
includes the
the average
average wages
wages inin both
both
Buildings 2023, 13, 896 regions for individual years, which were taken from the data of the Czech Statistical
regions for individual years, which were taken from the data of the Czech Statistical7Of- Of-
of 15
fice. It is assumed that the entire earnings will be used to pay off the apartment.
fice. It is assumed that the entire earnings will be used to pay off the apartment.

Figure
Figure 2.2.Availability
Figure2. Availability of owner-occupied
of
Availability owner-occupied
of owner-occupiedhousing
housing in the
in
housing the Prague
in Prague region,
region,
the Prague 2017–2022.
2017–2022.
region, Data source:
Data
2017–2022. source: soft-
soft-
Data source:
ware
ware EVAL,
EVAL, version
version 2.0, 2017–2022.
2.0, 2017–2022.
software EVAL, version 2.0, 2017–2022.

Figure3.
Figure
Figure Availability of
3.3. Availability
Availability of owner-occupied
of owner-occupiedhousing
owner-occupied housingin in
housing thethe
in Karlovy
the VaryVary
Karlovy
Karlovy region,
Vary 2017–2022.
region,
region, Data source:
2017–2022.
2017–2022. Data
Data
source: software
software
source: EVAL,
EVAL,EVAL,
software version
versionversion 2.0, 2017–2022.
2017–2022.
2.0, 2017–2022.
2.0,

Whencomparing
When
When comparingboth
comparing bothregions,
both regions, we
regions, we find
find that
that the
that the availability
the availabilityof
availability ofowner-occupied
of owner-occupiedhousing
owner-occupied hous-
hous-
is
ing significantly
is worse
significantly in
worse the
in Prague
the Pragueregion. Currently,
region. Currently,it takes
it 17.9
takes years
17.9
ing is significantly worse in the Prague region. Currently, it takes 17.9 years of savings of
years savings
of to attain
savings to
to
the average
attain the older older
average apartment with awith
apartment floor aarea
floorof area
70 square
of 70 meters.
square In addition,
meters. In the situation
addition, the
attain the average older apartment with a floor area of 70 square meters. In addition, the
in the Prague
situation the region
in the Praguehas significantly
region worsened
has significantly
significantly over the
worsened lastthe
over five years.
last ThereThere
five years.
years. is a gap
is
situation in Prague region has worsened over the last five There is
between household income and the purchase price of real estate. Real estate thus becomes
aa gap
gap between
between household
household income
income and and the
the purchase
purchase priceprice ofof real
real estate.
estate. Real
Real estate
estate thus
thus
less affordable,
becomes less which leads
affordable, which to the to
leads fact
thethat
factathat
greater
a number
greater numberof households
of households willwill
use
becomes less affordable, which leads to the fact that a greater number of households will
rental
use rentalhousing.
rental housing.
housing.
use
In the Karlovy Vary region, the availability of owner-occupied housing is also deterio-
rating over time, but the situation is deteriorating significantly more slowly (9.8 years in
2022). In the Karlovy Vary region, a person with an average salary can reasonably afford
to own his/her housing if he/she is interested in owning. In contrast, this rule no longer
applies to the Prague region.

4.2. Apartment Ownership Changes

Figures 4 and 5 show how many changes in apartment ownership occurred in individ-
ual quarters between 2018 and 2022 in both monitored regions. The values shown represent
the actual number of transactions as recorded by the Cadaster of Real Estate. These are
only changes of ownership, for which the Cadaster of Real Estate also recorded information
about the purchase price of the property. This means that these figures do not capture
ownership changes related to gifts and inheritance of real estate, as these transactions are
made independently from property prices. The red curve shows the trend line in the form
of a moving average (period 2).
 a reduction in the availability of owning housing. At the same time, households concerns
about the recession are growing.
If we compare the number of transactions per person, we find that in the Prague re-
gion, there is an average of one real estate transaction per quarter per 370 inhabitants,
while in the Karlovy Vary region there is only one real estate transaction per quarter per
Buildings 2023, 13, 896 8 of 15
1892 inhabitants. It was confirmed that the wealthier the region, the greater the turnover
in the real estate market.

Buildings 2023, 13, x FOR PEER REVIEW 9 of 16

Thenumber
Figure4.4.The
Figure numberofofchanges
changesininapartment
apartmentownership,
ownership, Prague,
Prague, quarters,
quarters, 2018–2022.
2018–2022. Data
Data source:
source:
software EVAL, version 2.0, The Czech Office for Surveying, Mapping, and Cadaster, 2018–2022.
software EVAL, version 2.0, The Czech Office for Surveying, Mapping, and Cadaster, 2018–2022.

Figure 5. The
The number
numberofofchanges
changesininapartment
apartment ownership, Karlovy
ownership, KarlovyVary region,
Vary quarters,
region, 2018–2022.
quarters, 2018–
2022. Data source:
Data source: software
software EVAL,EVAL,
versionversion 2.0,Czech
2.0, The The Czech
OfficeOffice for Surveying,
for Surveying, Mapping,
Mapping, and Ca-
and Cadaster,
daster, 2018–2022.
2018–2022.

During
4.3. Real theLiens
Estate COVID-19 pandemic, a significant increase in real estate transactions can
be observed.
Figures 6 and 7isshow
This due to
thea number
number of of new
factors including,
entries for example,
of the right more right)
of lien (pawn time the
on
investors had for exploring new investment opportunities. In addition, many
real estate without distinguishing between the type of real estate and new loans or loanhouseholds
received unexpected
refixations. support
The figures depictfrom
rightsthe
of state, and at the
lien relating same time spending
to apartments, opportunities
commercial real estate
were significantly limited. In consequence, households’ savings increased significantly [36].
and land. Unfortunately, it was not possible to filter out separate data concerning only
Furthermore, there was concern about the impending high inflation, so investors looked
liens of apartments from the source data. Publicly accessible data in the Cadaster of Real
for all potential investment opportunities that would ensure the preservation of the value
Estate have a specific structure that does not provide this information.
of their capital. Real estate was considered the best instrument.
The data shows a significant drop in the number of newly granted real estate loans
In response to high inflationary pressures, the Czech National bank adopted various
from mid-2022. This is due to the fact that the Czech National Bank significantly raised
measures tightening the so far loose monetary policy specified in the following text. The
the base interest rates (2-week repo rate: 2017–0.25% p.a., 2022–7.00% p.a.) and at the same
property market reacted strongly. In the second half of 2022, there was a significant turnover
time tightened the conditions for providing mortgages [9]. For that reason, people who
in the real estate market and a significant decrease in transactions. During this period,
can take out a mortgage have been significantly reduced, and the property market split
there was a sharp increase in interest rates for mortgage loans and thus at the same time a
one into a supported social rental housing available for households whose housing spend-
reduction in the availability of owning housing. At the same time, households’ concerns
ings are above a threshold of 35% of their net salary, and second into apartments for high-
about the recession are growing.
income households. The middle class has almost lost all hope of buying their homes. Cur-
rently, this is a contentious issue above all for the young generation. The high price level
of real estate also works against potential borrowers. In 2021, for a typical development
project, it was estimated that 40% of the apartments were sold for cash and 60% were sold
with the use of a mortgage. At the end of 2022, this ratio has changed significantly so that
more than 80% of apartments are sold for cash. Currently, only creditworthy investors
Buildings 2023, 13, 896 9 of 15

If we compare the number of transactions per person, we find that in the Prague
region, there is an average of one real estate transaction per quarter per 370 inhabitants,
while in the Karlovy Vary region there is only one real estate transaction per quarter per
1892 inhabitants. It was confirmed that the wealthier the region, the greater the turnover in
the real estate market.

4.3. Real Estate Liens

Figures 6 and 7 show the number of new entries of the right of lien (pawn right) on
real estate without distinguishing between the type of real estate and new loans or loan
refixations. The figures depict rights of lien relating to apartments, commercial real estate
and land. Unfortunately, it was not possible to filter out separate data concerning only liens
Buildings 2023,
Buildings 2023, 13,
13, xx FOR
FOR PEER
PEER REVIEW
REVIEW 10 of
10 of 16
16
of apartments from the source data. Publicly accessible data in the Cadaster of Real Estate
have a specific structure that does not provide this information.

Figure 6.6.The
Figure6.
Figure The number
Thenumber
numberofofofreal
real estate
realestate liens,
estateliens, Prague,
liens,Prague, quarters,
Prague,quarters, 2018–2022.
quarters,2018–2022. Data
2018–2022.Data source:
Datasource: software
source:software
software EVAL,
EVAL,
EVAL, version
version
version 2.0,
2.0,
2.0, The The Czech
The
Czech Czech Office
Office Office for Surveying,
for Surveying,
for Surveying, Mapping,
Mapping,
Mapping, and Cadaster,
and Cadaster,
and Cadaster, 2018–2022.
2018–2022.
2018–2022.

Figure7.
Figure
Figure Thenumber
7.7.The
The numberof
number ofofreal
realestate
real estateliens,
estate liens,Karlovy
liens, KarlovyVary
Karlovy Varyregion,
Vary region,quarters,
region, quarters,2018–2022.
quarters, 2018–2022.Data
2018–2022. Datasource:
Data source:
source:
software EVAL,
softwareEVAL,
software version
EVAL,version 2.0,
version2.0, The
2.0,The Czech
TheCzech Office
CzechOffice for
Officefor Surveying,
forSurveying, Mapping
Surveying,Mapping and
Mappingand Cadaster,
andCadaster, 2018–2022.
Cadaster,2018–2022.
2018–2022.

4.4. Transfers
4.4. Transfers of
of Apartments
Apartments from
from Housing
Housing Cooperatives
Cooperatives to to Private
Private Ownership
Ownership
There are
There are two
two basic
basic forms
forms ofof apartment
apartment ownership
ownership in in the
the Czech
Czech Republic:
Republic: personal
personal
apartment ownership
apartment ownership and and cooperative
cooperative apartment
apartment ownership.
ownership.
Personal apartment
Personal apartment ownership
ownership hashas aa fundamental
fundamental advantage
advantage inin that
that the
the new
new owner
owner
is rewritten in the Cadaster database (through the registration of her/his ownership
is rewritten in the Cadaster database (through the registration of her/his ownership right) right)
and the new owner can do whatever he wants with the apartment,
and the new owner can do whatever he wants with the apartment, for example, he canfor example, he can
use it
use it as
as collateral
collateral to
to arrange
arrange aa mortgage
mortgage or or rent
rent this
this apartment
apartment toto any
any tenant.
tenant.
Cooperative apartment
Cooperative apartment ownership
ownership means
means thatthat the
the real
real owner
owner of
of the
the entire
entire apartment
apartment
Buildings 2023, 13, 896 10 of 15

The data shows a significant drop in the number of newly granted real estate loans
from mid-2022. This is due to the fact that the Czech National Bank significantly raised the
base interest rates (2-week repo rate: 2017—0.25% p.a., 2022—7.00% p.a.) and at the same
time tightened the conditions for providing mortgages [9]. For that reason, people who can
take out a mortgage have been significantly reduced, and the property market split one into
a supported social rental housing available for households whose housing spendings are
above a threshold of 35% of their net salary, and second into apartments for high-income
households. The middle class has almost lost all hope of buying their homes. Currently,
this is a contentious issue above all for the young generation. The high price level of real
estate also works against potential borrowers. In 2021, for a typical development project, it
was estimated that 40% of the apartments were sold for cash and 60% were sold with the
use of a mortgage. At the end of 2022, this ratio has changed significantly so that more than
80% of apartments are sold for cash. Currently, only creditworthy investors and borrowers
operate in the real estate market [37].
By comparing data from both monitored regions, we find that the drop in the number
of liens is higher in the Prague region. This is caused by the fact that real estate prices
in Prague are very high, and people are forced to borrow higher amounts and thus more
easily fall out during the assessment of creditworthiness by the bank.
Following our analysis, we anticipate a more significant and broader scope of the
price cycle in the economically weaker region (Karlovy Vary region, as per our study) and
a sluggish rebound of the property market, which validates the presence of slow market
adjustment processes and persistent imbalances in the property market. Simultaneously,
we can observe greater resistance to price decreases in the luxury segment of the property
market and in the region with higher property prices (Prague).

4.4. Transfers of Apartments from Housing Cooperatives to Private Ownership

There are two basic forms of apartment ownership in the Czech Republic: personal
apartment ownership and cooperative apartment ownership.
Personal apartment ownership has a fundamental advantage in that the new owner is
rewritten in the Cadaster database (through the registration of her/his ownership right)
and the new owner can do whatever he wants with the apartment, for example, he can use
it as collateral to arrange a mortgage or rent this apartment to any tenant.
Cooperative apartment ownership means that the real owner of the entire apartment
building is the housing cooperative, and the user of this apartment acts only as a tenant
of the apartment. The user of the apartment is also a member of the housing cooperative
and has various rights and obligations associated with this apartment and a share in the
ownership of the housing cooperative. The basic disadvantage is that he cannot use this
apartment as collateral to arrange a mortgage. At the same time, the possibilities of further
subletting this apartment are limited. In some cases, the management of the housing
cooperative must agree with the subtenant.
Due to these advantages and disadvantages, the market value of personally owned
apartments is approximately 10 to 20 percent higher than cooperatively owned apartments.
Figures 8 and 9 show the number of transfers of apartments from housing cooperatives
to personal ownership. Over time, many housing cooperatives have been disappearing and
being replaced by personal ownership of individuals. Many active co-owners of apartment
buildings are pushing to the management of housing cooperatives for the transfer to
personal ownership. This pressure is higher in locations with a higher real estate price
level. In the Prague region, this process is slowly coming to an end, because most of the
housing cooperatives have already disappeared, but in the Karlovy Vary region, we can
still observe the continuation of this process.
 tives to personal
ing and ownership.
being replaced Over time,
by personal many housing
ownership cooperatives
of individuals. Many have beenco-owners
active disappear-of
ing and being replaced by personal ownership of individuals. Many active
apartment buildings are pushing to the management of housing cooperatives for the co-owners of
apartment buildings are pushing to the management of housing cooperatives
transfer to personal ownership. This pressure is higher in locations with a higher real es- for the
transfer
tate priceto personal ownership.
level. In the This pressure
Prague region, is higher
this process in locations
is slowly coming with
to aan
higher
end, real es-
because
tate
most price level.
of the In thecooperatives
housing Prague region,
havethis process
already is slowly coming
disappeared, to an
but in the end, because
Karlovy Vary re-
Buildings 2023, 13, 896 most of the housing cooperatives have already disappeared, but in the Karlovy Vary11re-
of 15
gion, we can still observe the continuation of this process.
gion, we can still observe the continuation of this process.
5 000
5 000 4 419 4 346

THE NUMBER OF TRANSFERS OF APARTMENTS

4 500 4 419 4 346

THE NUMBER OF TRANSFERS OF APARTMENTS

4 500
4 000
4 000
3 500
3 500 2 882
3 000
2 882
3 000 2 475 2 360
2 500 2 475
2 500 2 360
2 000
2 000
1 500
1 500
1 000
1 000
500
500
0
0 2018 2019 2020 2021 2022
2018 2019 2020 2021 2022
Figure 8. The number of transfers of apartments from housing cooperatives to personal ownership,
8. The
Figure The
Figure number transfers
of transfers of apartments from housing cooperatives to personal ownership,
Prague8.region,
number
years, of of apartments
2018–2022. Data from
source: softwarehousing
EVAL, cooperatives to personal
version 2.0, The ownership,
Czech Office for Sur-
Prague region,
Prague years, 2018–2022. Data source: software
EVAL,EVAL, version 2.0, The Office
Czech for
Office
Sur-for
veying,region,
Mappingyears,
and2018–2022.
Cadaster, Data source:
2018–2022. software version 2.0, The Czech
Surveying,
veying, Mapping
Mapping and Cadaster,
and Cadaster, 2018–2022.
2018–2022.

400
400 366
366
THE NUMBER OF TRANSFERS OF APARTMENTS

350 338 338

THE NUMBER OF TRANSFERS OF APARTMENTS

350 338 338

300 275 274
300 275 274
250
250
200
200
150
150
100
100
50
50
0
0 2018 2019 2020 2021 2022
2018 2019 2020 2021 2022
The
Figure9.9.The
Figure number
number ofof transfers
transfers ofof apartments
apartments from
from housing
housing cooperatives
cooperatives toto personal
personal ownership,
ownership,
Figure 9.
KarlovyThe number
Vary of
region, transfers
years, of apartments
2018–2022. Data from
source: housing
software cooperatives
EVAL, to
version personal
2.0, The ownership,
Karlovy Vary region, years, 2018–2022. Data source: software EVAL, version 2.0, The CzechOffice
Czech Officefor
Karlovy Vary
Surveying, region,
Mapping years,
and 2018–2022.
Cadaster, Data source:
2018–2022.
for Surveying, Mapping and Cadaster, 2018–2022. software EVAL, version 2.0, The Czech Office
for Surveying, Mapping and Cadaster, 2018–2022.
4.5. Transfers of Apartment Ownership from the State and Municipalities to Personal Ownership
4.5. Transfers of Apartment Ownership from the State and Municipalities to Personal Ownership
4.5. Transfers
After of Apartment
1990, Ownership
there were from the
significant State and
changes in Municipalities
the ownership to of
Personal Ownership
apartments in the
After 1990, there were significant changes in the ownership of apartments in the
Czech
AfterRepublic.
1990, thereUntil 1990, most apartments were owned by the state and municipalities.
Czech Republic. Until were significant
1990, most changes
apartments werein owned
the ownership of apartments
by the state in the
and municipalities.
However,
Czech afterUntil
Republic. 1990,1990,
the state
most and municipalities
apartments were sold these
owned by apartments
the state and tomunicipalities.
existing tenants
However, after 1990, the state and municipalities sold these apartments to existing tenants
on a large scale
However, in the
the state
process of privatizationsold
[38].these
The apartments
main reasons existing
includedtenants
the very
on a largeafter 1990,
scale in the processandofmunicipalities
privatization [38]. The main reasonstoincluded the very
on neglected technical
a large scale in the condition
process of of the
ofthe housing
privatization stock, a
[38].aThe high degree of rent regulation, many
neglected technical condition housing stock, highmain reasons
degree of rentincluded the many
regulation, very
problems with tenants (non-payment of rent, damage to the apartment,
neglected technical condition of the housing stock, a high degree of rent regulation, many complaints from
neighbors, etc.), and high operating costs for maintaining the housing stock [39].
The existing tenants were very interested in buying the apartments, as the purchase
price was very low and did not correspond to the normal market value. The main part of
the apartment privatization ended around 2015 and since then only a limited number of
apartments have been sold to existing tenants.
Privatization of apartments took place on such a large scale that, especially in large
cities, there is now a negative situation where the cities currently lack social apartments,
which are needed for key professions that ensure the running of the city (teachers, po-
licemen, firefighters, nurses, etc.). Currently, cities are starting new construction of social
 price
price was
was veryvery low
low and
and diddid not
not correspond
correspond to to the
the normal
normal market
market value.
value. TheThe main
main part
part ofof
the
the apartment
apartment privatization
privatization endedended around
around 20152015 andand since
since then
then only
only aa limited
limited number
number of of
apartments
apartments have have been
been sold
sold to to existing
existing tenants.
tenants.
Privatization
Privatization of of apartments
apartments took took place
place on
on such
such aa large
large scale
scale that,
that, especially
especially in
in large
large
Buildings 2023, 13, 896 cities,
cities, there
there isis now
now aa negative
negative situation
situation where
where thethe cities
cities currently
currently lacklack social
social apartments,
apartments,
12 of 15
which
which are are needed
needed forfor key
key professions
professions that that ensure
ensure the the running
running of of the
the city
city (teachers,
(teachers, police-
police-
men,
men, firefighters,
firefighters, nurses,
nurses, etc.).
etc.). Currently,
Currently, cities
cities areare starting
starting newnew construction
construction of of social
social
housing.
housing. However,
However, these
these new
new apartments
apartments must
must meet
meet current
current technical
technical standards,
standards, and
and the
the
housing. However, these new apartments must meet current technical standards, and the
costs
costs of
of their
their construction
construction are
are thus
thus very
very high.
high. It
It is
is obvious
obvious that
that city
city management
management has
has not
not
costs of their construction are thus very high. It is obvious that city management has not
thought
thought
thought strategically
strategically
strategically in the
ininthe area
area
the of
area apartment
ofof
apartment
apartment privatization
privatization
privatization in
ininthe
the long
thelong
longterm.
term.
term.As mentioned
AsAs
mentioned
mentioned
above,
above, the
the most
most affected
affected group
group of
of residents
residents are
are young
young adults,
adults,
above, the most affected group of residents are young adults, who no longer have who
who no
no longer
longer have
have aa chance
chance
a chance
to
totoacquire
acquire an
an apartment
apartment in
in personal
personal ownership
ownership under
under favorable
favorable
acquire an apartment in personal ownership under favorable conditions, because conditions,
conditions, because
because there
there
there
is nothing
is is
nothing
nothing to transfer
tototransfer
transfer anymore.
anymore.
anymore.
Figures
Figures
Figures 10
1010and
and
and11 show
1111show
show the
the development
thedevelopment
development of
ofof the
the privatization
theprivatization
privatization of apartments
ofofapartments
apartments between
between
between
2018
2018 and
and 2022.
2022. For
For both
both regions,
regions, the
the list
list includes
includes only
only those
those authorities
authorities
2018 and 2022. For both regions, the list includes only those authorities that implemented that
that implemented
implemented
more
more
more than
thanthan20 apartment
2020apartment
apartment transfers
transfers
transfers per
per
per year.
year.
year.

Figure
Figure
Figure 10.10.
10. TheThe
The number
number
number ofof
of transfers
transfers
transfers ofof
of apartment
apartment
apartment ownership
ownership
ownership from
from
from thethe
the state
state
state andand
and municipalities
municipalities
municipalities toto
to
private
private
private ownership,
ownership,
ownership, Prague
Prague
Prague region,
region,
region, years,
years,
years, 2018–2022.
2018–2022.
2018–2022. Data
Data
Data source:
source:
source: software
software
software EVAL,
EVAL,
EVAL, version
version
version 2.0,
2.0,
2.0, The
The The
Czech
Czech
Czech Office
Office for
Office Surveying,
forfor Mapping
Surveying,
Surveying, Mapping
Mapping and Cadaster,
and
and Cadaster,
Cadaster, 2018–2022.
2018–2022.
2018–2022.

Figure 11. The number of transfers of apartment ownership from the state and municipalities to
private ownership, Karlovy Vary region, years, 2018–2022. Data source: software EVAL, version 2.0,
The Czech Office for Surveying, Mapping and Cadaster, 2018–2022.

4.6. Real Estate Foreclosures

Figures 12 and 13 describe the development of the number of real estate foreclosures in
both monitored regions. Even though the economic situation is worsening, and unemploy-
ment is slightly increasing, the number of real estate foreclosures is decreasing, especially
in the Prague region. We see the cause of this phenomenon in the fact that during the
COVID-19 pandemic, the state provided large social benefits to all citizens, which increased

Buildings 2023, 13, 896
is very low compared to other EU countries. Overdue rent or mortgage payments in 2020
in the Czech Republic concerned only 1.7% of debtors, in the EU it was 3.2% of debtors
[40].
Between 2015 and 2020, many people in the Czech Republic took out a mortgage at
very low-interest rates, when they agreed on a refixation period, usually between five 13and
of 15
eight years. This period will gradually end for them, and they will have to negotiate a new
mortgage agreement under new conditions, when two to three times higher interest rates
can be expected. The current average interest rate for mortgages is 6.34% p.a., while in
household savings. Currently, however, these savings have already decreased significantly,
May 2021 this rate was at 2.4% p.a. [41]. A deterioration in the repayment of mortgages
and the liquidity of households, partly also due to unprecedented inflation, can be expected
cantotherefore
worsen. be expected in the near future.

800 757

THE NUMBER OF REAL ESTATE FORECLOSURES 700

600 578
543

500
422
400 366

300

200

100

0
2018 2019 2020 2021 2022
Buildings 2023, 13, x FOR PEER REVIEW 14 of 16
Figure 12. The number of real estate foreclosures, Prague region, years, 2018–2022. Data source:
Figure 12. The number of real estate foreclosures, Prague region, years, 2018–2022. Data source:
software
software EVAL,
EVAL, version
version 2.0,2.0,
TheThe Czech
Czech Office
Office forfor Surveying,
Surveying, Mapping
Mapping and
and Cadaster,
Cadaster, 2018–2022.
2018–2022.
1 000
864
THE NUMBER OF REAL ESTATE FORECLOSURES

900 830
800 746
720
700

600
518
500

400

300

200

100

0
2018 2019 2020 2021 2022

Figure 13. The number of real estate foreclosures, Karlovy Vary region, years, 2018–2022. Data source:
Figure 13. The number of real estate foreclosures, Karlovy Vary region, years, 2018–2022. Data
software
source: EVAL,EVAL,
software version 2.0, The
version 2.0,Czech OfficeOffice
The Czech for Surveying, Mapping
for Surveying, and Cadaster,
Mapping 2018–2022.
and Cadaster, 2018–
2022.
In general, however, the number of properties in foreclosure in the Czech Republic is
very low compared to other EU countries. Overdue rent or mortgage payments in 2020 in
5. Conclusions
the Czech Republic concerned only 1.7% of debtors, in the EU it was 3.2% of debtors [40].
This paper documents
Between thatmany
2015 and 2020, in 2022 there in
people wasthea Czech
significant turnover
Republic tookinoutthea real estate at
mortgage
market in the Czech Republic. Due to the remarkable increase in the price
very low-interest rates, when they agreed on a refixation period, usually between five and of mortgages,
theeight
number ofThis
years. newperiod
mortgages and the number
will gradually end forofthem,
realized
and real
theyestate transactions
will have to negotiate fell asig-
new
nificantly. Currently, buyers are waiting to see if there will be a drop in
mortgage agreement under new conditions, when two to three times higher interest rates real estate prices,
andcanthebereal estate market
expected. as a whole
The current has frozen.
average interestBased on mortgages
rate for our analysis, is we expect
6.34% p.a.,a bigger
while in
and wider magnitude of the price cycle in the poorer region (the Karlovy
May 2021 this rate was at 2.4% p.a. [41]. A deterioration in the repayment of mortgages Vary region in can
our analysis)
therefore beand slowerinrecovery
expected the nearoffuture.
the property market, confirming slow market adjust-
ment mechanisms and long-lasting disequilibrium present on the property market. At the
5. Conclusions
same time, a higher downward rigidity in prices can be observed in the high-end segment
of the property
This papermarket and also
documents forinthe
that high
2022 property
there was a priced region
significant (Prague).
turnover in the real estate
Beyond our analysis, a currently resonant issue is the affordability of
market in the Czech Republic. Due to the remarkable increase in the price of mortgages, owner-occupied
housing is decreasing
the number of new due to very high
mortgages realnumber
and the estate prices and high
of realized realinterest
estate rates for mort-fell
transactions
gages. The consequence is an increased demand for rental properties. The significant
growth in demand for rental properties was also supported by the war in Ukraine, when
the Czech Republic provided housing to a very high number of refugees compared to
other EU countries.
Buildings 2023, 13, 896 14 of 15

significantly. Currently, buyers are waiting to see if there will be a drop in real estate prices,
and the real estate market as a whole has frozen. Based on our analysis, we expect a bigger
and wider magnitude of the price cycle in the poorer region (the Karlovy Vary region in our
analysis) and slower recovery of the property market, confirming slow market adjustment
mechanisms and long-lasting disequilibrium present on the property market. At the same
time, a higher downward rigidity in prices can be observed in the high-end segment of the
property market and also for the high property priced region (Prague).
Beyond our analysis, a currently resonant issue is the affordability of owner-occupied
housing is decreasing due to very high real estate prices and high interest rates for mort-
gages. The consequence is an increased demand for rental properties. The significant
growth in demand for rental properties was also supported by the war in Ukraine, when
the Czech Republic provided housing to a very high number of refugees compared to other
EU countries.
In the next period, due to the deterioration of the macroeconomic situation, a further
deterioration in the availability of owner-occupied and rental housing can be expected.
Bigger problems in the real estate market will occur in poorer regions of the Czech Republic,
which include, for example, the Karlovy Vary region.

Author Contributions: Conceptualization, R.S.H.; methodology, B.K.; software, E.H.; validation,

M.P.; formal analysis, M.P.; investigation, K.Č.; resources, E.H.; data curation, E.H.; writing—original
draft preparation, E.H.; writing—review and editing, R.S.H.; writing—review and editing, M.P.;
visualization, K.Č.; supervision, B.K. All authors have read and agreed to the published version of
the manuscript.
Funding: This research received no external funding.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

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