The volume of loans extended to households increased by CZK32.4bn q/q in Q2, the stats office said in a press release on Thursday. The increase was primarily made up of higher volume of housing loans with the volume of mortgage loans extended increasing by CZK25.7bn q/q. CSU chairperson Iva Ritschelova said that the annual increase in the sales prices of real estate reached 9.5% in Q2 with the market prices of older apartments being up 18.7 % y/y in the Czech Republic and 18.0% y/y in Prague.
According to the Hypoindex data calculated by Fincentrum, local banks granted 29,711 new mortgages in the total value of CZK60.9bn in Q2, up from 28,466 loans in the value of CZK57.6bn in Q1, while since the beginning of the year — 79,899 new mortgages in total value of CZK151.2bn, up by 2.4% y/y and 7.9% y/y in number and value terms, respectively, were provided. According to the Hypotecni Banka mortgage bank Index, which is based on real estimates of market prices of the property Hypotecni Banka clients have purchased via a mortgage loan, prices of flats increased by 12.1% y/y in Q2 with the growth accelerating from 11.5% y/y in Q1. At the same time, prices of family houses grew at a slower pace of 5.8% y/y in the second quarter of the year with the growth speeding up from 4.5% y/y the previous quarter. Note that currently the Czech central bank CNB assesses property prices as being overvalued and pointed out in mid-June that the robustly growing mortgage lending have been also affecting property prices. The CNB said in its Financial Stability report that although the systemic risks remain only potential in all areas, those in the area of property purchase financing are no longer purely hypothetical with the main risk being the continuation of a spiral between property prices and property purchase loans. This was one of the factors making it double the counter-cyclical buffer (CCB) rate to 1.0%, effective as of Jul 1, 2018, in June, with the move aimed to ensure sufficient capital buffers to cover losses the banking sector may face in the future. The CNB also said that if credit growth remains high, lending standards ease further and systemic risks related mainly to the financing of property purchases continue to grow, it will increase the buffer rate further. Moody’s assessed the move as credit positive for local banks as they would benefit from either holding more regulatory capital or reduce their risk-weighted assets. Today the CNB is to announce potential changes to the CCB rate that is currently set at 0.5%.