Jaroslav Smrčka: A property at the right address is always a good investment.
The development company Moravská stavební – Invest focuses on the two largest domestic markets – Prague and Brno. “We expect high demand for new housing to continue in 2017. This is supported by record-low mortgage rates, positive economic development, low unemployment and the resulting willingness of people to invest in a new home,” says Sales Director Jaroslav Smrčka.
Various sources often give contradictory information – shed some light on the situation for us: what is the state of the property market, really?
From the developer’s – or rather the seller’s – point of view, both the Prague and the Brno market are in good shape. Sales in 2015 reached CZK 22 billion in Prague and CZK 2.9 billion in Brno. Prices rose by around 10% year on year. At present we have a seller’s market in both Prague and Brno; demand clearly outstrips supply. Apart from increased interest from buyers, the excess of demand over supply is also caused by a shortage of new apartments. In Brno this is due to uncertainty around the zoning plan, whose update was overturned by a court in spring 2015. The situation in Prague is similar: the proposed new zoning plan was not adopted, leaving us in a position where there is a shortage of land for the construction of new residences. In Prague this is compounded by uncertainty around the building regulations, and in both cases generally by the slowness of the permitting process – obtaining zoning decisions and building permits – in which the Czech Republic ranks among the slower countries in international comparisons. It can therefore be assumed that the current situation will not change any time soon, that new apartments will not appear quickly and that their prices will continue to rise.
What customers probably want to know most is whether now is the right time to buy a property. Do you agree?
If the property is in a good location, with good transport links and amenities, and of good technical quality, then it is always a good investment. Of course, you then have to be able to manage that investment. More and more people prefer buying such a property to let rather than keeping their savings in a bank. And if you also take advantage of the current record-low mortgage rates – that is, combine your own funds with a mortgage loan – you can acquire several such properties. The return on your own funds is then many times higher than on savings accounts. If the market fluctuates, the impact on the price of such properties is minimal. So if I had to give a recommendation, then yes, it is time to buy a property, provided it meets the criteria above. That is the kind of project we aim for and currently have on offer. Others are in preparation and will be added to the offer during next year.
Developers usually outdo one another in “attractive and accessible locations” – after all that “developing”, are there any left?
Attractive and accessible plots where greenfield construction could take place are now scarce. That, however, is an opportunity to use brownfield sites.
In the central parts of both Prague and Brno there are industrial and manufacturing sites and buildings from the past that no longer have any proper use today. This is where new projects will arise – to name a few at random, in Prague the area of Masaryk railway station, the Žižkov freight station and the Karlín area; in Brno mainly the area around the main railway station, the area of Mendlovo náměstí and the site of the former Zbrojovka arms factory. “Waking up” these places for construction is often very complicated, however, whether because of complex ownership relations, environmental burdens or other problems. Nevertheless, these locations, given their position, are very promising. Our Brno project Rezidence Lužánky fits exactly into what I have just described. The building, formerly the office and production building of the Snaha Brno shoemaking cooperative and unused for many years, was demolished and replaced with a residential project – all in a very attractive location opposite Lužánky Park and right next to the centre.
If we were to sum up, how much have you built, or had built, so far?
The company has existed since 1998, so in two years’ time we will have been on the market for 20 years. In that time we have delivered over 3,250 residential units and around 17,400 m² of retail and office space, and prepared almost 100,000 m² of land for construction. Our first projects include apartment construction in Brno – Lesná and the construction of family houses and apartments in Kuřim near Brno. In 2002 we started our first project in Prague, in Nehvizdy – the construction of family houses and apartments. Since then we have been moving in Prague from the peripheral locations towards the centre, and we currently offer both central Prague locations (Karlín) and peripheral ones (Vinoř, Cholupice). In Brno we currently offer the Panorama project and Rezidence Lužánky. From 2007 to 2011 we were also active in Zlín.
What are your current flagship projects?
In Brno we are currently delivering the extensive Panorama project, which across all its phases amounts to some 370 apartments and 60 family houses; we are completing an apartment building by Lužánky Park (around 100 apartments); and we are preparing further projects to be launched before the end of 2016 and in 2017. These involve the construction of family houses, an apartment building in the centre of Brno (in both cases the start is planned before the end of 2016) and an extensive office-and-residential complex whose start is planned for mid-2017. In Prague we have three apartment-building projects with an office part under way, totalling around 350 apartments, and three family-house projects totalling around 80 units.
How are customers’ requirements changing? Are they becoming more demanding?
Customers today are far more demanding than they used to be. And it is not only apparent at the handover of apartments or family houses, where it is now standard for a hired specialist to take over the unit on their behalf. It is already evident when they choose a unit. One of the decisive factors influencing their final purchase decision is not only the technical parameters of the building and the standard fittings of the units, but also, for example, their layout. We try to meet all of this, or even to be a step ahead.
Construction is monitored not only through our own control system, but also through external firms that inspect the workmanship together with us. When preparing new projects, we work with interior specialists to design the layouts of apartments and family houses in detail and to incorporate the requirements our clients found lacking in existing projects. An apartment or a family house is a HOME, and they want to feel as good as possible in it. We try to bring our projects as close to that as we can.
You focus on Prague and Brno. Is there a difference between the demands of Prague and Brno customers? House versus apartment, city versus countryside, ecological buildings?
The demands of Prague and Brno customers are identical and do not differ significantly. The emphasis is always on the technical quality of the unit.
Where do you see your greatest competitive advantage? What is your added value?
An individual approach to customers in dealing with their requirements – whether that concerns client modifications made during the construction of the project or the method of financing, where the client pays 10% of the purchase price on signing the contract and the remaining 90% only once the apartment or family house is completed.
How are you developing as a company, and what are your plans for the future?
In terms of the volume of work we almost doubled between 2014 and 2015, and in 2016 we expect growth of around 20% compared with 2015. We expect further growth in the future, though no longer so steep. We deliver projects exclusively in Prague and Brno, including the surrounding areas that are easily accessible by transport. In both cities we are preparing new projects to be launched at the end of 2016 and during 2017. Given the stages of readiness these projects are at, however, I cannot be specific now.
What do you think the property market will look like in 2017?
We expect high demand for new housing to continue in 2017. This is supported by record-low mortgage rates, positive economic development, low unemployment and the resulting willingness of people to invest in a new home.
