Czech housing market "froze" in H2 2022, dropped by half in full-year

PRAGUE (Reuters) - Czech housing transactions dropped by 50% last year to a 10-year low, as soaring inflation, high interest rates and the war in Ukraine scared buyers, data from the Czech Banking Association (CBA) and Dataligence showed on Wednesday.

Dataligence CEO Milan Rocek said demand culminated in late 2021, with the market short of apartments on offer, but the start of Russia's invasion of Ukraine in February 2022 brought an abrupt change.

"Higher energy prices, a sharp rise in inflation, that all changed people's mood," he said. "This was multiplied by growth of mortgage interest rates. The real estate market practically froze in the second half because of that."

The number of new mortgages fell to a 20-year low last year while the volume was the lowest in a decade, the survey said.

New mortgage volumes for the full year, excluding refinancing, dropped by 57%, CBA had reported earlier, as official interest rates soared to 7% last year from 0.25% the year before.

The CBA has reported an 82% year-on-year drop in new mortgages in December alone.

Despite the drop in volumes, prices gained as supply continued to be tight.

Prices of older apartments reached a peak around mid-2022 but still showed a 3.4% year-on-year rise in the fourth quarter, the survey said.

Newly-built units recorded an 11% year-on-year increase in the fourth quarter, with prices in the capital Prague reaching 151,643 Czech crowns ($6,812.97), or 6,397.14 euros, per square metre.

Czech house prices grew by the fastest rate in the European Union over the past three years, the survey said, up by 54% over the period, versus 24% in the EU as a whole.

(1 euro = 23.7048 Czech crowns)

($1 = 22.2580 Czech crowns)

(Reporting by Jan Lopatka; Editing by Sharon Singleton)