The difference between market and regulated rent is decreasing, according to experts

Prague - The gap between market and regulated rents is gradually closing. Market rents have not been rising significantly for a long time, and in some cases, they are even decreasing, while regulated rents are increasing. This is indicated by real estate experts that ČTK consulted.
    "Market rents have been on a downward trend for several years, primarily due to the oversupply over demand. According to our estimates, 20 to 30 percent of newly built apartments are still being rented out," said Jakub Sedmihradský from the real estate company Lexxus to ČTK. "The decline in market rents primarily affects large apartments in the lower and mid segments in older buildings without secured parking. In new residential projects, rents are rather stagnating," he added.
    A similar trend is also confirmed by other real estate agents. "Generally, we are registering stagnation in rents on average for the entire Czech Republic. The greatest interest is in cheap smaller apartments, but their prices have increased by only 2.6 percent year-on-year," stated Petr Illetško, director of AAAByty. "The rent for low-quality apartments, such as panel apartments on the outskirts of cities, or on the other hand, excessively large and luxurious apartments, has decreased year-on-year. Even by as much as ten percent," he added.
    According to Illetško, the market rent for a small apartment in a panel building in a housing estate in 2006 ranged from 10,000 to 12,000 crowns. Today, the rent for the same apartment ranges from 9,000 to 11,000 CZK. In the case of a large apartment in the narrower center of Prague, last year’s monthly rent was around 15,000 to 20,000 crowns. Today, in this apartment, tenants, according to Illetško, will pay between 14,000 and 18,000 crowns.
    "There will certainly be an influence of deregulation here, especially for smaller, cheaper apartments. The main influence I see is in the increasing supply of properties, so owners are competing by lowering prices," explained Jana Bidrmanová from the real estate agency Svoboda&Williams about the market rent trends. Bidrmanová estimates the average rent decrease for apartments up to 100 square meters to be around five percent per year.
    "Market rents have basically remained at the same level for the last three years, and even the gradual deregulation of rents has not affected this," described the situation in Prague and Central Bohemia Radim Koliba from the company Hot Reality. According to him, stagnation in market rents can also be observed in other regions of the Czech Republic.
    René Hradecký from the company Bonafide also does not see a significant drop in market rents in the metropolis. "In the case of the lower and middle price segment, we are dealing with properties that are in poor condition or in locations distant from public transport stops," Hradecký described the apartments where rents are decreasing to ČTK. "In the segment of exclusive properties, the situation is much more complex. Tenants are much more demanding regarding a diverse civic amenities, the possibility of parking is important, especially in the center of Prague, where parking is a problem," he added.
    Exchange rates also influence the decline in market rents for higher category apartments. "In the luxury segment, there is a decrease in tenants also due to the strengthening of the crown against the euro and the limiting of accommodation costs for employees of foreign companies. Foreign management is also increasingly being replaced by domestic managers," said Sedmihradský.
    According to Sedmihradský, the development of market rent prices is also influenced by rising energy prices. "The pressure to lower rents is also created by the rising prices of electricity and gas, which increases the overall costs of living for tenants," he said.
    According to the Czech Statistical Office (ČSÚ), market rents decreased by 0.3 percent year-on-year in October, while rents with regulated prices increased by 17 percent. Regulated rents will gradually increase from this year until 2010. There are currently around 800,000 apartments with regulated rents in the Czech Republic; about 420,000 of them are owned by individuals or companies.