“Since the spring, we have been identifying dozens of clients every month who are consulting with us about the possibilities of further mortgage repayments in the context of rising building material prices, which makes construction significantly more expensive for them,” said Filip Hrubý, spokesman for Česká spořitelna.
The problem of insufficient mortgage is solved in the bank more than every tenth client who builds or finances real estate under construction. “We assume that there are about twelve percent of clients in our mortgage portfolio who somehow solve this problem,” adds Hrubý.
Housing crisis: Why are flats and rents so expensive in the Czech Republic?
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Banks settle units up to dozens of cases a month, but the main wave is yet to come. “Each case requires an individual approach. It can be assumed that the number of these cases will gradually increase due to rising prices of construction work and materials, “emphasizes Michal Teubner from Komerční banka. According to Kateřina Petko from Equa Bank, next year these cases will be more frequent than this year.
Most often, these will be the owners who took out a mortgage for the purchase of the land and the building itself, and now during the approval process they have thus incurred costs that they are now unable to finance the construction from the original mortgage. “At the same time, they do not have the necessary cash or other real estate coverage and therefore do not have the opportunity to agree with the bank on increasing the loan.
“We record a few percent higher number of mortgages, for which we adjusted the conditions for drawing a loan due to the higher price of building materials,” says Zuzana Filipová from Moneta Money Bank. Banks usually deal with insufficient mortgages by offering an additional loan from a building society or by increasing the mortgage. However, only if the client is sufficiently creditworthy.
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“If the client has taken out the maximum possible mortgage with regard to the amount of income, then in combination with significantly higher interest rates than a year ago, there may no longer be room for a mortgage increase,” Petko emphasizes. In such a situation, the bank is said to recommend interrupting or slowing down construction.
Developers are more sensitive to the growth of construction costs than individual builders. “While banks usually offer credit increases themselves, we have reports that the developers themselves are in some cases withdrawing from purchase agreements,” says Martin Novák, chief analyst at Broker Consulting.
After all, developers make no secret of the fact that real estate prices can take a big step forward during mortgage processing. “Due to the rapid growth of the value of real estate, their price also increases. The mortgage approval process takes several months, when the price of real estate often rises and conditions for clients who may have a problem with lack of own funds needed to obtain a mortgage change,” says the executive. Martin Vachek, director of the Daramis development group.
Traps for buyers are usually a situation where it is not clear how much they will buy. “This is a situation where the price per housing unit is freely agreed and allows the contractor to increase the price on the basis of an inflation clause,” Zuzák emphasizes, adding that its importance is now significantly greater than before.
For the bank, such a situation is more complicated than simply setting up a budget. “If the developer withdraws from the signed contract with the client and, for example, demands a higher price, it is of course a complication. We handle such situations individually, “adds Teubner.
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The sale of real estate under construction is still a marginal issue. “In many cases, banks are refusing to increase mortgage lending, which creates extremely unpleasant situations. In the best case, people move to houses under construction and unapproved, “emphasizes Štěpán Křeček, an economist at BH Securities.
“In the worst case, the houses under construction are uninhabitable and families are forced to sell them because they cannot afford to pay their mortgages and pay rent,” he adds.
However, bankers emphasize that the sale of real estate under construction is currently rather an exception. “We do not identify clients selling houses under construction to any greater extent. If this happens, then in units of cases per month, “adds Hrubý.
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