Less available mortgages will increase rents. Those interested in new mortgage have the last three weeks.
Renting a flat 1 + kk in Prague Letnany will cost 11 thousand Czech crowns, a mortgage will come monthly by 1400 crowns more cheaply for the flat of the same parameters in the same locality. This is the situation on the Prague rental market according to the statistics of the real estate server UlovDomov.cz four weeks before the CNB tighten the rules for mortgage lending.
Starting from October Mortgage applicants will have to meet much stricter terms for obtaining a mortgage. This is expected by banks to cause a decline in the mortgage market and virtually cut off a large part of the middle class from the option to buy residential property. At the same time, it can be assumed that this restriction will intensify the fight for rents and will drive up rent prices due to higher demand.
The difference of a few hundred crowns to thousands of crowns in favor of a mortgage. This is the calculation in most locations in the capital. A comparison of average rents with mortgage repayments is made for an apartment of the same layouts. For example, according to the UlovDomov.cz data, in Vršovice renting an average 2 + kk will costs 16 thousand crowns, the same layout from the Central Group offer in the Petrohradská project can be purchased for CZK 4.69 million crowns, which at the current rate of 2.44%, 20% downpayment and 30 years maturity represents a monthly mortgage repayment of CZK 14,708.
Similarly, the situation for 3 + kk in Stodůlky. If the family pays CZK 24,000 per month for rent, then buying a new flat in the Jizni vyhledy project of the same parameters will costs CZK 7.16 million crowns. This represents - under the conditions mentioned above - monthly mortgage repayment of CZK 22,454.
"New mortgage rules will have a very negative impact on residents in Prague and will leave them two options: either keep renting and hope their salaries will rise significantly and property prices in the city will fall or purchasing a flat in Prague with a smaller floor area or less rooms, "said Central Group Executive Director Michaela Tomášková.
Mortgage still comes cheaper, but it will be not available for everyone.
At the moment, simple financial mathematics supports the long-term tendency of Czechs to prefer property ownership. However, from the beginning of October, a "new" factor will influence this tendency and it is a “mortgage availability”. As of the next month, Czech banks will start to apply new recommendations of the Czech National Bank which introduces two new indicators of the creditworthiness assessment of the client. The first examines the amount of all debts with respect to the applicant's total annual net income. The total debt amount cannot exceed nine net annual incomes of the client. The latter examines the monthly instalments of all loans with respect to the applicant's income. The mortgage instalment together with all possible debts repayments cannot exceed 45% of the net monthly income of the applicant.
According to mortgage bank analysts, these rules will, in particular, mean significant restrictions on access to mortgages for medium-income groups in Prague, and some applicants with above-average incomes may have problems as well. According to the assumptions, the Central Bank will primarily help investors with sufficient financial resources and landlords who will benefit from an increased interest in rents. Strong demand and limited supply of rental flats will make ownership housing even more advantageous, but the way to it will be closed for a number of Czechs.