PRAGUE, March 18 (Reuters) - Demand for residential property in the Czech Republic could plunge by almost half this year and prices will drop as the economic crisis bites into household incomes, a Deloitte research note showed on Wednesday.
The central European economy has decelerated dramatically in past months as a recession in the euro zone hammered exports, which make up some 70 percent of the country’s gross domestic product.
The ex-communist country saw demand for housing surge in recent years when it was growing by around 6 percent, but developers have taken a hit due to falling demand and banks, prompted by the credit crisis, have cut back on lending.
Demand for residential property should fall 45 percent this year back to levels seen in 2006, the Deloitte study showed.
It said prices of existing flats could drop by up to 20 percent and the value of new flats by up to 15 percent. Flats in pre-fab, communist-era “panelak” buildings, could plunge by up to 30 percent, the study showed.
Deloitte said the Czech mortgage market was relatively healthy because lending was mainly in the local currency, reducing losses from foreign exchange fluctuations caused by the economic crisis. Another positive factor was that Czech banks had not provided any type of subprime mortgages, Deloitte said.
In neighbouring Hungary and Poland, many mortgage holders have borrowed in euros and Swiss francs, exposing themselves to significantly higher loan maintenance costs because the forint and zloty have lost heavily against those currencies. (Reporting by Robert Mueler; Writing by Jana Mlcochova; editing by Elaine Hardcastle)