Volume of mortgage loans drops to Kc 220 bn in 2018.
The volume of mortgage loans on the Czech market decreased annually by Kc6bn to Kc220bn in 2018, according to estimates published at today's press conference by Hypotecni banka, the mortgage market leader.
This year, the mortgage loan volume is expected to fall to Kc200bn Hypotecni banka head Jiri Feix said.
Hypotecni banka's estimates also said that property prices increased at a fast pace.
The mortgage market development last year was significantly impacted by the Czech National Bank's (CNB) regulation gradually increasing interest rates and toughening up conditions of getting a mortgage loan, Feix said.
Uncertainty around interest rates' development and the CNB's recommendation taking effect in October caused a major rise in the volume of mortgage loans provided in the third quarter of last year.
The CNB tightened mortgage loan conditions, saying that the loan should not exceed nine times the net annual income of an applicant who should also spend no more than 45 percent of their net monthly income on debt service.
The mortgage loan interest rate grew annually by 0.7 percentage point to 2.9 percent at the end of 2018. Impact of the regulation cannot be assessed until the middle of this year when the market calms down, Feix said.
Month-on-month differences in mortgage loan volumes were small for the most of the year. There was a swing in August and September, registering higher interest in mortgages before the CNB's regulation coming into effect.
The central bank's recommendation affected more than 10 percent of mortgage loan applicants, according to Hypotecni banka's internal data, Feix said. The overall volume of housing loans grew annually by Kc15bn, thanks to a rise in loans provided by building societies, Hypotecni banka's estimates said. The volume of home-building savings loans could be up to Kc75bn.
Chytry Honza analyst Daniel Hornak expects the market to fall by 20 percent this year, that is a lot below Kc200bn.
People are waiting for property prices to drop because of regulation and interest rates, Martina Maleckova-Parizkova of Bidli real estate company said. The only thing that could decrease property prices in the long term is a bigger construction output, she said.
Many people will have to lower their standards of living, or rent, 4Brokers consulting company Zdenek Simaichl said.
According to estimates, prices of flats increased annually by 10.2 percent and prices of family houses added 6.2 percent, with land prices rising at a quicker rate than the year before, Hypotecni banka board member Vladimir Vojtisek said. There are many factors influencing property prices, however, Hypotecni banka believes the market will cool down and the price growth rate will decelerate, Vojtisek said.