The crisis in international credit markets that in many countries is being interpreted as the beginning of the end of long property booms will have a limited impact on the real estate market in the Czech Republic, a senior central bank official has said.

Ludek Niedermeyer, the Czech central bank’s deputy governor, acknowledged that prices have risen sharply in recent years, but said a reversal in the current trend is unlikely.

“Indicators... show that prices have jumped forward significantly. But I wouldn’t dare say that, with the economic and demographic development as we see it now, we’re facing a price drop,” Niedermayer said in an interview with Hospodarske Noviny, a daily newspaper.

Residential property prices in the Czech Republic have tripled since 1995 and capital growth has increased by 117 percent since 2001. The price boom has been greatest in Prague but even provincial cities and rural areas have felt the effects of the influx of money following the country’s accession to the European Union in 2004. However, analysts note that regardless of the effects of the international credit market turmoil, the Czech Republic is facing some domestic issues that could curtail growth over the coming years.

With inflation now nearing the central bank’s target of 3 percent and interest rates still at historic lows at 3 percent, further rate hikes are likely in the near future in order to slow rising consumer prices. In a recent interview with Thomson Financial News, Niedermeyer said the central bank should raise rates “significantly” to keep inflation on target and prevent the economy from overheating. The Czech economy has grown in an annual rate of 6 percent in the past two years, a pace of growth it looks set to repeat this year.

Though the high economic growth rate is likely to neutralize the effects of higher interest rates on the real estate market, a further factor that could lower housing demand is the government’s plan to raise tax on new build properties from 5 percent to 19 percent in 2008.

But while new builds will become less desirable, that situation could, in turn, lead to higher demand for resale properties, with an added boost coming from plans to lift restrictions on buyers from other EU countries in 2009. Even the most conservative estimates predict house price growth in the region of 7 percent to 8 percent per year for the next five years.