An expert's view: Current developments in the real estate market

“Expensive mortgages, high property prices and double-digit inflation are the main reasons currently preventing most Czechs from accessing owner-occupied housing. Developers are also trying to adapt to this situation, seeking ways to continue building and selling new flats under these conditions without having to put their development plans on hold. One common tactic is to make greater use of a model combining the option to rent with a subsequent purchase into private ownership. Abroad, this is a common method known as rent to buy,” explains David Novotný, owner and managing director of the real estate company Bohemian Estates.

Older flats are becoming cheaper, while new flats are holding their prices

Anyone who bought a flat in recent years believing that prices would only rise in the future may face a slight reality check. Older flats are starting to become cheaper. Prices of new flats will not fall, but neither will they rise. “There are now more flats coming onto the market, buyers have a wider choice, and this is inevitably reflected in prices. This trend is also evident at flat viewings – where dozens of interested parties used to be common, there are now barely ten. Data from property portals show that prices of flats in very good condition have stalled and have not increased for some time. Interest in buying flats has been declining since the turn of 2020 and 2021, when the greatest boom occurred. New flats are more or less holding their prices, but older ones are starting to become cheaper. We expect that prices of older flats could fall by 10 per cent over the coming year or two,” says David Novotný.

At the same time, rental housing prices are beginning to rise. Although the desire for owner-occupied housing remains deeply rooted in the Czech Republic, the situation on the property market has prompted Czechs to consider renting more seriously. The main reasons have been property prices, high interest rates on mortgage loans and general uncertainty caused by economic downturns. “Rental prices are rising steadily, with the highest rents in Prague and Brno. At the beginning of last year, the average monthly rent for a 2+kk flat was around twelve thousand; by the end of the year, it had climbed to sixteen thousand. Here, the level of rent will reflect the market situation, energy prices and geopolitical factors,” says Novotný of Bohemian Estates.

Higher housing benefit and improved access to support

From January 2023, housing benefit also increased and, due to changes in certain rules, became more accessible. According to preliminary calculations, this will affect up to one hundred thousand households, which will newly be eligible for benefits under state social support. Everyone already receiving this benefit will be better off – some by thousands, others by hundreds.

So-called normative costs, i.e. the upper limits for state assistance, are also increasing, and these caps are being merged for one-person and two-person households. The existing norms for one-person households were indeed very low. The disadvantage for Prague residents is also ending – until now, they were entitled to the benefit only where housing costs exceeded 35 percent of their net income. This will now be 30 percent, the same as in other regions.