Rising rental housing costs are on the horizon
Rental prices, especially in Prague, are beginning to return to pre-coronavirus levels. However, the current price growth is not over, and further increases are on the horizon. As a result, rental housing will become the new norm for more and more households, including those that may previously have preferred owner-occupied housing. Another reason is rising mortgage interest rates, which mean that fewer people, especially in larger cities, can afford a mortgage.
According to data from the European Statistical Office for the third quarter of last year, property prices on the Czech market rose by around 22 %, far above the European average of 9 %. For the European Union, this was also the largest increase in prices since the economic crisis in 2008.
“European statistics have given the Czech Republic one unenviable distinction: no other country has recorded such a dramatic year-on-year increase in property market prices this year. In 2008, however, prices fell sharply, by as much as a fifth in some markets such as Spain and Ireland. The Czech Republic does not face similar prospects. According to the Governor of the Czech National Bank, we are not expecting either a price collapse or a property market crisis, as flat and house prices are overvalued in relation to other economic indicators, such as wage levels,” explains David Novotný, owner and managing director of the real estate company Bohemian Estates.
Rising rents on the horizon
Although property prices did not fall dramatically with the onset of the pandemic, the coronavirus effect led to lower prices in the rental housing market due to the crisis in short-term rentals.
“For roughly the past year and a half, we have seen rents fall, but they are now rising again – not only in Prague, but in other regions of the Czech Republic as well. Looking at price trends over the longer term, we can see that the coronavirus pandemic did not actually make rents cheaper; it merely slowed their growth over time. What we are seeing now is a return to pre-Covid price levels. This will probably come as the greatest shock in Prague, where rents fell with the introduction of pandemic restrictions because of the downturn in the short-term rental business,” Novotný explains.
Nevertheless, data and experience from property portals show that increasingly expensive rental flats are still being snapped up – listings are remaining online for less time and the number of views is increasing. This suggests that more and more people are looking for rental accommodation at present. Another important factor in rent pricing will be the fact that rental housing will no longer be the domain of the capital and other major cities alone.
This trend will gradually take hold in other regions of the Czech Republic. Rising prices of residential property, increasing mortgage interest rates, slow construction and the bureaucratic burden associated with obtaining building permits are ultimately making the dream of home ownership unattainable for an increasing number of Czechs.